Read the statement in four passes
First check identity and timing: employer, employee, payment date, pay period and pay frequency. Next check earnings: hours, rate, salary, overtime, bonus and any other compensation. Then read taxes and employee deductions separately. Finally reconcile the stated net pay to the deposit or split deposits. This order prevents a wage error from being mistaken for a tax problem.
Read current-period and year-to-date columns deliberately. A year-to-date figure is not the deduction from today’s check. A running retirement contribution is not money removed twice. Some statements also display employer contributions or employer payroll taxes as information. Do not subtract an employer expense from your own gross pay unless the statement identifies an employee deduction. IRS General Instructions for Forms W-2 and W-3 (2026).
Source: IRS General Instructions for Forms W-2 and W-3 (2026)
Gross pay is not one universal tax base
Federal income tax wages, Social Security wages and Medicare wages can differ. For example, ordinary traditional 401(k) employee deferrals generally reduce federal income tax wages while remaining subject to Social Security and Medicare. Designated Roth contributions do not create the same current federal income tax reduction. The W-2 instructions distinguish those reporting treatments.
Other benefit deductions depend on the actual arrangement. Do not assume every item labeled pretax reduces every tax. Ask payroll which wage bases a specific deduction affects. An imputed taxable benefit can also affect taxable wages without producing an equal cash payment, so a complex statement may not fit a simple gross-minus-everything model.
At year end, Form W-2 helps separate the categories: box 1 reports federal taxable wages, box 2 federal income tax withheld, boxes 3 and 4 Social Security wages and tax, and boxes 5 and 6 Medicare wages and tax. The numbers have different purposes. A retirement deferral can help explain why box 1 differs from box 5 without indicating an error. IRS General Instructions for Forms W-2 and W-3 (2026).
Source: IRS General Instructions for Forms W-2 and W-3 (2026)
A fictional $4,000 paycheck, reconciled
Worked example
Assume one employee receives $4,000 cash gross pay for a period. There is a $400 traditional 401(k) deferral, no other pretax benefits or taxable noncash items, and all wages remain below the annual Social Security base. Federal income-tax wages for the illustration are $3,600; Social Security and Medicare wages remain $4,000.
Employee Social Security is $248: $4,000 multiplied by 6.2%. Medicare is $58: $4,000 multiplied by 1.45%. Assume the pay statement shows $350 federal income tax withholding, $150 state income tax withholding and $40 after-tax deductions. The $350 and $150 are supplied example statement amounts, not withholding calculations or rates claimed for any filing status or state.
Net cash is $2,754: $4,000 minus $400 minus $248 minus $58 minus $350 minus $150 minus $40. Total cash reductions are $1,246, but only $806 is labeled tax in this example. The remaining $440 comprises retirement savings and an after-tax deduction. Calling the entire $1,246 tax would misstate the statement.
This example excludes Additional Medicare Tax, local deductions, garnishments, reimbursements and split deposits. It also assumes the deferral is valid under the plan and applicable contribution limits. It teaches reconciliation; it does not estimate the employee’s annual liability or imply that your employer must withhold $350. IRS General Instructions for Forms W-2 and W-3 (2026). IRS Publication 15 (2026), sections 5, 6, 7 and 9.
Sources: IRS General Instructions for Forms W-2 and W-3 (2026) · IRS Publication 15 (2026), sections 5, 6, 7 and 9
Pay frequency changes the comparison
Twice a month and every two weeks are different schedules. In a typical 24-payment semimonthly year, $72,000 of even annual gross pay produces $3,000 per payment. In a 26-payment biweekly year, the same annual amount averages about $2,769.23 per payment. Those are gross arithmetic illustrations before deductions, not payroll promises.
Check the employer’s calendar and salary arrangement rather than assuming every year has the same number of payments. Start dates, unpaid leave, variable hours and an occasional extra payday can change the relationship. Monthly budgeting should also distinguish an annual monthly average from two biweekly deposits. Two deposits multiplied by 12 counts only 24 payments.
Afterax’s take-home tool converts its supported annual federal estimate into pay-frequency averages. It does not run an employer’s payroll calendar or guarantee that the average equals any particular check. A mismatch may be entirely explainable before you investigate an engine error.
Why a check can change without a salary change
Compare the new statement with the previous ordinary one, line by line. A benefit enrollment, a traditional-versus-Roth election, an extra W-4 withholding amount, a bonus or a correction can change the deposit. A Social Security line can also stop or shrink as an employee reaches the annual wage base at an employer, while Medicare continues under its own rules.
For 2025 the Social Security base is $176,100; for 2026 it is $184,500. Use the base for the year being checked. Additional Medicare withholding follows a separate employer rule, so a change in that line should not be interpreted as a change in ordinary federal income tax.
If federal income tax withholding is unexpectedly zero, look at taxable wages, frequency and the entire W-4 election, including spouse or second-job coordination. Zero on one low paycheck is not automatic proof of payroll error, and a zero labeled allowances is not proof of zero withholding. Use actual amounts and an annual projection. SSA Contribution and Benefit Base. IRS Publication 15 (2026), sections 5, 6, 7 and 9. IRS Form W-4 (2026), pages 1–3.
Sources: SSA Contribution and Benefit Base · IRS Publication 15 (2026), sections 5, 6, 7 and 9 · IRS Form W-4 (2026), pages 1–3
A useful question for payroll
Scope and limits
Send payroll the payment date and the specific line that needs explanation. For example: “This check shows $4,000 gross, $400 traditional 401(k), $3,600 federal taxable wages and $4,000 Medicare wages. Can you confirm which deductions affect each wage base?” That gives the team a checkable question. Keep the response with the statement if it explains an ongoing arrangement.
If the earnings themselves are wrong, identify the hours, rate or compensation item first. If the taxable wages appear correct but withholding looks unsuitable for your household, review the W-4 using the IRS estimator. These are different fixes. Do not change retirement elections simply to make a calculator’s net amount match an unexplained deposit.
Afterax’s federal take-home estimate excludes state and local tax, benefits and other employer deductions. State profiles are context, not calculated state liability in profile-only jurisdictions. Final 2025 remains the default; 2026 figures are planning estimates. Bring the model and statement onto the same basis before deciding that either one is wrong. IRS Tax Withholding Estimator.
Source: IRS Tax Withholding Estimator
Common questions
Is everything taken from gross pay a tax?
No. Retirement contributions, insurance and other deductions can reduce cash pay without being tax.
Why can Medicare wages exceed federal income tax wages?
Traditional 401(k) deferrals are one common reason: they generally reduce current federal income tax wages while remaining subject to Medicare.
Will an annual federal calculator reproduce my deposit?
Only if all the relevant bases, withholding methods, timing and deductions match its scope. Afterax provides annual federal estimates and frequency averages, not employer payroll replication.
Sources
Primary references checked October 24, 2026.
- IRS General Instructions for Forms W-2 and W-3 (2026)IRS · Boxes 1–6; elective deferrals and designated Roth contributions · accessed 2026-10-24
- IRS Publication 15 (2026), sections 5, 6, 7 and 9IRS · Supplemental wages; Social Security and Medicare; withholding · accessed 2026-10-24
- SSA Contribution and Benefit BaseSSA · 2025 and 2026 table rows · accessed 2026-10-24
- IRS Form W-4 (2026), pages 1–3IRS · Steps 2–4 and general instructions · accessed 2026-10-24
- IRS Tax Withholding EstimatorIRS · Who can use the estimator; what you need; results · accessed 2026-10-24
Next steps
Compare federal annual pay averages
View the same federal math as annual averages per pay period, not a payroll replica.
Explore employee payroll tax
Check employee Social Security and Medicare amounts plus employer matching.
Understand contribution tax savings
Read how pre-tax 401(k) and HSA contributions reduce taxable wages.