2019 tax year: IRS LTR 12C for line 18d of Form 1040

[adarshnayak]

I completed 2019 tax return using turbotax (Joint filing) and now IRS sent me a letter (LTR 12C) asking "to support the amount of wage or withholding entry of $xxx on line 18d, For 1040". The line 18d in my case is for "Excess social security tax" and it's evident through my W-2s sent to IRS. Should I send them W-2s again? How should I explain it to them?

PS - All W-2s in this filing belongs to only one person in the joint filing

[BMcCalpin]

Two possibilities just to mind (there could easily be more).

First, they may be asking for copies of your W-2s because they did not receive one or more of them from your employer(s). As you probably know, your employer is required to send a copy of your W-2 to the IRS by January 31st, but sometimes that doesn't happen, and the IRS would like to see what you received from your employers.

In this case, sending images of your W-2 would be what they want (TurboTax sends the data from the W-2, but not a photoimage of it).

Another thing that happens surprisingly often is this: if you received two or more W-2s and the aggregate of the Social Security tax withheld is more than the cap for that year (for 2019, maximum SS taxes to be withheld is $8,240 on $132,900 of SS wages), then if both (or all) of the W-2s are from different employers, then the refund of the excess if put on line 11 of Schedule 3 (1040), which is what I assume you are referring to.

HOWEVER, if it appears that the W-2s are from the SAME employer, then the rule is that you have to go to your employer and ask for the refund, because you can't get it through your 1040. 

And how do they know that the two W-2s are from the same employer? Generally, it's because they have the same EIN.

How does this happen? Sometimes companies reorganize midyear, putting you into a "new company" that still uses the mother company's EIN - so it looks like you are still working for the same company.

The new trend towards using PEOs (https://en.wikipedia.org/wiki/Professional_employer_organization ) is also causing confusion, because while you think you work for multiple companies, as for as the IRS is concerned, you are working for the PEO (because your W-2s have the PEO's EIN).

Before we explore what to do about that, come back and tell us if either of these situations sounds like yours, or of there is something else.

[VolvoGirl]

Or check W2 box 12. You may have entered Code A by mistake. There could be a problem if you accidentally typed Code A in for box 12. Maybe you entered an extra box 12 with code A or you put an A instead of the D. That can happen if you mistake the box 12 label for the Code letter.

Is the total of box 4 (only box 4 not box 6) on all your 2019 W2s for Social Security more than $8,239.80?  Then send the IRS copies of all your W2s.  

[adarshnayak]

Thanks for you reply @BMcCalpin

Yes, I have two W-2s from two different employers for the 2019 tax year. And when I add up box 4 on both the W-2s, it exceeds $8240 limit. The excess amount is specified in "line 11 of Schedule 3 (1040)" and the same has been copied to line 18d of Form 1040. Also, this return wasn't filed electronically instead I did paper filing, as I had to request ITIN for my spouse. Hence, I know they have got W-2 copies along with my 1040 filing.

Also, when they ask to send "Other forms reporting wage and withholdings" (along with W2s), should I also send them 1099-Bs? This by the way is not relevant to the question they have on line 18d of Form 1040.

[adarshnayak]

Thanks for your reply @VolvoGirl 

I checked again and I doesn't seem to be a mistake.

Yes, the total of box 4 (only box 4 not box 6) on all your 2019 W2s for Social Security adds to more than $8,239.80

[BMcCalpin]

Your description is puzzling in that it appears that you have done everything right.

I suppose that someone could have dropped your tax file in the IRS mailroom and the W-4s got separated from your return. If so, then just sending them a copy of the W-2s again with a letter of explanation should be sufficient.

Off hand, I don't know of other forms that easily come to mind on which Social Security taxes are withheld. Social Security taxes are part of the "self-employment" taxes that are calculated on Schedule SE (if you are self-employed) and yes this amount is added to the line 11 Schedule 3 (1040) amount.

And some people are not required to have Social Security withheld. Certain government employers (some federal, state and local governments) don't have to withhold social security tax (because employees pay into a different retirement system).

But this is puzzling. I would just write them back in a timely manner, include the copies of the W-2s, outline in your letter what you are sending and how the sum of the box 4s is more than $8,240, and ask them to explain to you why they are not satisfied with this. I.e., what are you missing?

It just sounds like they don't have the same information as you do.

Bill

P.S. one more thing: are you here on a visa (since you said something about an ITIN for your spouse, it makes me wonder if you are here working in the US on a visa)? Some people on certain visas are not supposed to have any Social Security or Medicare tax withheld - but employers get this wrong all the time. If you don't mind me asking, what sort of visa are you here on?

[adarshnayak]

Thanks Bill.

Yes, I am on H1B visa and I am sure that I have pay social security and medicare taxes.

[BMcCalpin]

You are correct; employees here on H1B visas do indeed have Social Security and Medicare taxes withheld - see https://www.irs.gov/individuals/international-taxpayers/aliens-employed-in-the-us-social-security-ta... 

This is (in my experience) usually an issue for students here on F-1 or J-1 visas.

OK, let's see how the IRS responds to you when you send them the follow-up.

[Critter-3]

This happens from time to time even if you do everything correctly ... so simply respond as directed ASAP so the return can continue to be processed.   

** another possibility ... all the W-2 forms may not have gotten to the IRS from the ITIN office so they are missing or as mentioned above they came lose and one went missing.   Also note that mailed in returns need to be entered into the system by humans and maybe they missed keying in the missing form.   When dealing with people & paper errors happen which is why efiling returns (when possible) is highly recommended.