Quick Answer
Memo earnings are informational amounts on your pay stub that don't impact your actual take-home pay. They typically show imputed income for benefits like life insurance over $50,000, personal use of company vehicles, or other taxable fringe benefits. About 65% of employees with employer-provided life insurance see memo earnings.
Best Answer
Sarah Chen, Payroll Tax Analyst
Employees who receive standard benefits packages and see memo earnings on their pay stubs
What are memo earnings and why don't they affect my paycheck?
Memo earnings are informational amounts that appear on your pay stub but don't add to your actual gross pay or take-home amount. Think of them as "FYI" entries that your payroll system tracks for tax reporting purposes. The most common memo earning is imputed income for group term life insurance coverage over $50,000.
Example: Group term life insurance memo earning
Let's say you earn $75,000 annually and your employer provides $200,000 in group term life insurance. Here's how the memo earning works:
This $20 monthly memo earning appears on your pay stub but doesn't increase your gross pay that paycheck. Instead, it's added to your annual W-2 Box 1 wages at year-end for tax purposes.
Common types of memo earnings
Key factors that create memo earnings
What you should do
Check your pay stub's memo earnings section monthly to understand what benefits are creating taxable income. Use our [paystub-explainer](https://explainmypaycheck.com/tools/paystub-explainer) tool to upload your pay stub and get a detailed breakdown of all earnings, including memo items. Remember that memo earnings will increase your taxable income on your W-2, potentially affecting your tax refund or balance due.
Key takeaway: Memo earnings are informational amounts that don't affect your current paycheck but will be added to your annual taxable income, typically increasing your W-2 Box 1 wages by $200-500 for most employees with standard benefits.
*Sources: [IRS Publication 15-B](https://www.irs.gov/pub/irs-pdf/p15b.pdf), [IRS Notice 2013-54](https://www.irs.gov/irb/2013-40_IRB#NOT-2013-54)*
Key Takeaway: Memo earnings show imputed income that doesn't affect your current paycheck but increases your annual taxable wages, typically by $200-500 for employees with standard benefits.
Common memo earnings types and their typical impact on annual taxes
| Memo Earning Type | Typical Annual Amount | Additional Federal Tax (22% bracket) | Additional Federal Tax (12% bracket) |
|---|---|---|---|
| Group term life insurance | $200-400 | $44-88 | $24-48 |
| Personal use of company car | $2,000-5,000 | $440-1,100 | $240-600 |
| Domestic partner benefits | $1,200-3,600 | $264-792 | $144-432 |
More Perspectives
Sarah Chen, Payroll Tax Analyst
New employees encountering memo earnings for the first time and worried about their paycheck accuracy
Don't worry — your paycheck is correct
Seeing "memo earnings" on your first pay stub can be alarming, especially if you're worried your employer made a mistake or you're not getting paid correctly. The good news: memo earnings don't affect the amount deposited into your bank account.
Think of it like a receipt
Memo earnings are like getting a receipt for something you didn't directly pay for. Your employer is required to track certain benefits they provide you, even when those benefits don't immediately affect your paycheck. The most common example for new employees is group term life insurance.
If your company provides you with $100,000 in life insurance and you're 25 years old, you might see a memo earning of about $8 per month. This represents the taxable value of life insurance coverage above $50,000, but it won't reduce your take-home pay right now.
When memo earnings matter
Memo earnings become real taxable income at the end of the year. If you have $100 in memo earnings throughout the year, that $100 gets added to Box 1 of your W-2 form. This means you'll owe income tax on that extra $100, which typically translates to an additional $12-22 in federal taxes depending on your tax bracket.
What to do as a new employee
1. Don't panic — your direct deposit amount is still correct
2. Ask HR what specific benefits are creating memo earnings
3. Keep track of memo earnings throughout the year to estimate the tax impact
4. Plan accordingly — memo earnings might slightly reduce your tax refund
Key takeaway: Memo earnings won't affect your first few paychecks but will add about $100-300 to your taxable income for the year, resulting in roughly $12-66 more in federal taxes.
Key Takeaway: Memo earnings won't affect your first few paychecks but will add about $100-300 to your taxable income for the year, resulting in roughly $12-66 more in federal taxes.
Sources
- IRS Publication 15-B — Employer's Tax Guide to Fringe Benefits
- IRS Notice 2013-54 — Group Term Life Insurance Coverage
Related Questions
Reviewed by Sarah Chen, Payroll Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.