Recovering Social Security Taxes Withheld by Multiple Employers

It is not uncommon to find yourself working for more than one company in a given tax year. Employers are obligated to withhold social security taxes from your wages, regardless of the amount withheld by a previous employer. This will often lead to the amount that is withheld to exceed the maximum amount of tax that can be imposed for the year. $7,254.00 is the maximum amount the IRS can withhold from wages in 2014 (6.20%, the rate in effect for 2014 multiplied by $117,000 wage base).. If this total is exceeded when the withholding from two or more employers exceeds the limit, you can recover this income by claiming a credit for a payment of taxes on your tax return for the year.

Where to claim credit for excess social security withholding

• If you file Form 1040, enter the excess on line 69.
• If you file Form 1040A, include the excess in the total on line 41. Write “Excess SST” and show the amount of the credit in the space to the left of the line.
• You cannot claim excess social security tax withholding on Form 1040EZ.

If any one employer withheld too much social security due to an error, you cannot claim the excess as a credit against your income tax. Your employer should make an adjustment of the excess for you. If the employer does not make an adjustment, you can use IRS Form 843Claim for Refund and Request for Abatement, to claim a refund.

The following example uses 2013 numbers $7,049.40 Maximum based on 6.2% of $113,700 base

Example: Tom drew wages from of Acme Widget, Inc. from January through March, 2013, and earns $65,000 during that period. From April through the end of the year he works for Best Widgets, Inc. and earns $60,000 during that period. Acme Widget, Inc. withholds $4,030 in social security taxes from the wages it pays Tom ($65,000 × 6.20%), and Best Widgets, Inc. withholds $3,720 ($60,000 × 6.20%) in social security taxes from the wages it pays him. When the calendar year ends, a total of $7,750 withheld, which is $700.60 above the $7.049.40 maximum amount for 2013. On his 2013 individual tax return, Tom will be entitled to (and should claim) a credit for a payment of taxes of $700.60.

Although you can recover any over withholding of Social Security taxes when you file your year end return, the IRS will have had has use of your money (interest free) for several months. They’re not required to pay you interest on the over withholding and that’s money lost. If you are making separate estimated tax payments throughout the year, it is possible to offset the loss by adjusting the amount that is sent in quarterly. Essentially, you may be able to use the over withholding as an estimated tax payment.

Table from IRS website 2013

Table 3-2. Maximum Social Security and RRTA Withholding for 2013

Joint returns.   If you are filing a joint return, you and your spouse must figure any excess social security or tier 1 RRTA separately.

Note.

All wages are subject to Medicare tax withholding.

All in all The tax Liability from year to year may sound overwhelming, but garvey & garvey, llc CPAs can easily assist business owners and employees with establishing a method that is appropriate for them so that there are no unwelcome surprises when the tax year ends.