The extent of earnings inequality is usually determined using survey data, but these data may not be accurate. Research indicates that some respondents are likely to avoid reporting their gross earnings and others are likely to misreport them. In addition, the format of the survey might affect the accuracy of responses to sensitive questions on issues such as earnings. Given these three possibilities, researchers’ conclusions might be biased. By comparing survey and administrative data, we looked for the nonreporting and misreporting biases suggested by the literature. We also investigated the mode of data collection as a source of nonreporting and misreporting bias. Finally, we analyzed the effects of nonreporting, misreporting, and the mode of data collection on conclusions on the degree of overall earnings inequality. The analyses drew on data from the German employee survey “Legitimation of Inequality Over the Life-Span” and linked administrative data from the Federal Employment Agency (N = 2,282). Using the administrative data as a benchmark, we found that respondents at the lower and upper end of the earnings distribution were more likely to not report or misreport their earnings. Interviewer presence led to higher nonreporting rates as well. Overall inequality was severely underestimated because of nonreporting whereas misreporting had little impact on conclusions on overall inequality.