Add up every paycheck for the year and you'll get your gross pay — the total your employer paid you before anything came out. Then you look at Box 1 on your W-2 and it's a smaller number. Nothing is wrong. Box 1 is your taxable wages, and some of your pay was set aside before the government got to tax it.
The same thing explains why Box 1, Box 3, and Box 5 are often three different numbers on the same form. Each box measures a different kind of taxable wage, and different deductions come out before each one.
Box 1 is gross pay minus your pre-tax deductions
Box 1 is "wages, tips, other compensation" — the wages federal income tax was actually charged on. To get it, payroll takes your gross pay and subtracts anything you put in with pre-tax dollars. The two big ones:
- 401(k) contributions. Money you route into your 401(k) comes out before federal income tax. Contribute $8,000 over the year and your Box 1 is roughly $8,000 lower than your gross. That's the whole point of a traditional 401(k) — you don't pay income tax on it now.
- Section 125 / cafeteria plan deductions. Pre-tax health, dental, and vision premiums, plus HSA and FSA contributions, come out before income tax too.
So if you earned $70,000 gross, contributed $8,000 to your 401(k), and paid $3,000 in pre-tax health premiums, your Box 1 is around $59,000. You're not being shorted — that $11,000 was already spoken for, tax-free, and it shows up elsewhere (401(k) money is flagged in Box 12 with code D).
Why Box 3 and Box 5 don't match Box 1
Box 3 is Social Security wages and Box 5 is Medicare wages — the wages those two taxes were charged on. They're usually higher than Box 1, and here's the reason: 401(k) contributions are exempt from income tax but not from Social Security and Medicare.
Your 401(k) money dodges income tax, so it lowers Box 1. But you still owe the 6.2% Social Security and 1.45% Medicare on it, so it does not lower Box 3 or Box 5. That's why those boxes come out bigger.
Section 125 deductions are different — pre-tax health premiums, HSA, and FSA money are exempt from both income tax and Social Security/Medicare. So they lower Box 1, Box 3, and Box 5 alike.
Putting it together with the same example ($70,000 gross, $8,000 to 401(k), $3,000 in Section 125 health premiums):
- Box 1 ≈ $59,000 — gross minus the 401(k) and the health premiums
- Box 3 and Box 5 ≈ $67,000 — gross minus only the health premiums, because the 401(k) is still hit by FICA
One more wrinkle on Box 3: Social Security has an annual ceiling ($184,500 for 2026). If you earned above it, Box 3 caps out there while Box 5 (Medicare, no cap) keeps climbing. High earners see Box 5 come in above Box 3 for that reason.
The takeaway
Three different wage numbers on one W-2 is normal and correct. Box 1 is the smallest because it excludes both 401(k) and pre-tax benefits. Box 3 and Box 5 are larger because 401(k) money still owes Social Security and Medicare. If you want to see how a single paycheck breaks all of this down as it happens, your paystub shows earnings, taxes, and deductions line by line — see Paystubs & tax documents.
Related: What is a W-2? · Paystubs & tax documents · How to fill out your W-4.