Frequency

• A paystub is presented to an employee each time he's paid, such as weekly, bi-weekly or monthly. The paystub provides information about gross and net earnings for that pay period. Depending on the employer's accounting system, it may also contain cumulative information for the year-to-date period.
  
  A W-2 is created once a year, at the end of the calendar year. Companies are required by federal law to give an employee his W-2 by January 31 of the new year. The W-2 contains all the pertinent wage information an employee needs to file his annual tax returns, both federal and state.
  
  

Legality

• A paystub is provided as a convenience to the employee. The Fair Labor Standards Act does not require employers to provide paystubs, though it does require complete and accurate records to be kept regarding employee wages and hours.
  
  The Internal Revenue Service (IRS) requires any employer that engages in trade or business to complete W-2s for any employees who've earned wages, even if those wages were non-cash. In addition to income information, W-2s must report deductions for Social Security and Medicare taxes. The employer must file copies of the W-2 with the IRS and must provide the employee with a copy.
  
  

Discrepancies

• A W-2 reports employee wage information for the entire calendar year. It seems logical that the information on the year's final paystub would mirror the information on the W-2, but that's not always the case. Generally, the last day of the year's last pay period isn't the same as the last day of the calendar year. This can cause the total annual earnings amount to differ on the two documents. The paystub may also contain additional information regarding miscellaneous deductions for items such as insurance premiums, retirement plans or other company benefits that require payments from the employee.
  
  

Tips

• There are times when either a paystub or a W-2 will fill the need for required documentation. When applying for a loan or mortgage, lenders will require the borrowers to produce either W-2s or recent paystubs. You may also need to provide payment records when applying for insurance.
  
  There is no legal requirement to keep paystubs for any length of time. You may want to accumulate them for the calendar year for verification when filing end-of-year taxes. The IRS suggests keeping annual W-2s until you begin receiving Social Security. The documents serve as a record of your earnings which are used when calculating your monthly Social Security benefit amount.