You will need to follow the instructions for the one employer situation. If you can't get the company to refund it, you can manually change the amounts on your W-2 and fill out Form 843 and request a refund from the IRS. See the instructions below under What if my employer can't cooperate.
Your employer is supposed to withhold 6.2% of your Social Security Wages (the Box 3 amount on your W-2), up to a maximum of $8,239.80 per taxpayer for the tax year 2019. If one employer withheld too much Social Security tax, you won't be able to take a credit for the excess on your tax return.
So, if your employer withheld too much, contact them and ask for:
Do not file with excess withholdings on your return, as you may be subjected to penalties and interest.
What if my employer can't—or won't—cooperate?
You can correct the Box 4 amount yourself before filing. Simply multiply the amount in Box 3 by a factor of 0.062 and enter that amount or 8,239.80 (whichever is less) in Box 4.
To get a refund for the excess withholding, fill out IRS Form 843: Claim for Refund and Request for Abatement according to the Form 843 Instructions and mail it in separately. Make a copy to keep with your tax return paperwork.
Hi.
Thank you for your response. Let me clarify. There are two employers despite only having one W-2. This is because they both used the same PEO - Justworks. It seems that neither employer can cooperate because they both did the right thing, with neither withholding more than the maximum. However, Turbotax insists that I follow the instructions for a single employer presumably because it only sees one W-2. Is there a way to override Turbotax so that we follow the instructions for two employers?
Thank you
Whose EIN is on your W-2? Justworks'?
Normally, a PEO (Professional Employer Organization) handle the personnel as their own employees. Since that is the case, the IRS (correctly) considers that you have only one employer - Justworks.
In this case, the IRS will not accept the request to refund the request to refund the excess SS tax through your tax return, and neither will TurboTax. In the past, the IRS has sent letters to taxpayers who claimed the refund of excess Social Security taxes on their return when the "two" employers had the same EIN; these letters told the taxpayers to go back to their employer(s) and get the refund from them.
TurboTax used to have a mechanism to allow an employee with two employers under one EIN to get the refund in the tax return, but since the IRS cracked down on the practice, TurboTax has removed that feature.
This is a Justworks' problem, and you need to explain to them that if you are considered an employee of Justworks (that is why I asked about whose EIN is on the W-2), then it is Justworks' problem to fix.
Otherwise, your only alternative to do as Dawn says and file a form 843 with the IRS.
You might note to the Justworks HR people, that the instructions for line 7 of form 843 say "Explain in detail your reasons for filing this claim and show your computation for the credit, refund, or abatement. If you attach an additional sheet(s), include your name and SSN or employer identification number (EIN) on it. Also attach appropriate supporting evidence." (see Form 843 Instructions).
In other words, if Justworks is your employer of record and they will not fix the problem, then you will, in the course of filing form 843 as is your right, be forced to explain to the IRS just why you are in this situation, thus bringing Justworks' behavior to the eyes of the IRS.
Hi BillM223,
Thank you for your thorough response. Do you have any suggestions on where to find the letter/position of the IRS on this (I have not found it)? It would make my discussion with Justworks easier, particularly as they have already rebuffed my attempt to get them to correct it. If you don't have it, that's fine too. I appreciate your help!
Thank you!
The general guidance is in the instructions for Form 1040. Look for the line 11 instruction for Schedule 3.
Hi everyone. I have done more research, and this against what was said here. The Federal Register says that each customer of a CPEO is to be treated separately for wage-base purposes. Relevant text and link follow:
"The proposed regulations also provide that if, during a calendar year, a covered employee receives remuneration from a CPEO for services performed by the covered employee for more than one customer of the CPEO, the annual wage base and withholding threshold do not apply to the aggregate remuneration received by the covered employee from the CPEO for services performed for all such customers. Rather, the annual wage base and withholding threshold apply separately to the remuneration received by the covered employee from the CPEO with respect to services performed for each customer."
There is a larger explanation in the following link:
https://www.federalregister.gov/d/2019-10856/p-22
With that in mind, how do I correctly file for a tax reimbursement under Line 11 Schedule 3 using TurboTax?
Thank you.
Thank you for the reference.
I see two things here:
1. "the annual wage base and withholding threshold apply separately to the remuneration received by the covered employee from the CPEO with respect to services performed for each customer."
This says to me that it is correct that each "employer" (actually, customer of the CPEO) withhold taxes on the employee independently of what the other customers of the CPEO are doing - which results in the possibility of over withholding Social Security taxes.
2. "Sections 3511(a) and (c), provide that, for federal employment tax purposes, a CPEO is treated as the employer of covered employees that are work site employees (section 3511(a)(1)) and covered employees that are not work site employees (non-work site covered employees) (section 3511(c)(1)) with regard to remuneration it pays to these covered employees."
"federal employment tax" refers to the Social Security, Medicare and other taxes that employers pay directly to the IRS.
Here, the IRS is reiterating that the CPEO is the employer of the employee, not any of the customers of the CPEO.
What this section from the Federal Register doesn't seem to address is what do you do when the inevitable happens and the two customers of the CPEO collectively withhold more than the Social Security limit, yet the CPEO itself has only the one EIN because it is the employer of record, so the existing IRS rules are that the employer must refund the excess SS withheld.
I have read this several times, and I don't yet see the solution to the dilemma.
What I will do is pass this on to the company.
As for your last question about getting the tax reimbursement on line 11, all I can tell you is that the software no longer permits that, for the reasons I gave earlier. If you have the CD/download software, you can possibly override that line, but (1) this voids the Intuit guarantee of accuracy, (2) possibly makes it impossible to e-file (someone overrides do, I don't know if all overrides do), and (3), will quite likely cause the IRS to write you a letter telling you not to take this amount on your return, as has happened to TurboTax customers in previous years when we still had the feature that allowed taxpayers in certain situations to claim this amount on the tax return despite "both" employers having the same EIN.
I will let you know if I hear anything.
Hi BillM223. Thank you for your answer. I agree that this is unusual. Please let me know if you hear anything back. I'm trying to figure out a workaround, as it seems that I really do need to edit that line directly. Thank you.
Hi @BillM223. Hope you've been safe. I was wondering if you had heard back from the company on this. Thank you.
Thank you for your concern. My wife and I both work from home, so we were practicing quarantining and social distancing long before it became trendy ;-).
I have not heard from the company on any plans to change how the program works this year. Frankly, at this point in the tax season, it's unlikely that a change will be made (if any) until after April 15th (and not the day after, either).
The workaround involves acquiring the "desktop" software if you don't already have it i.e., (the CD/download software), transferring your data to that software, then going into forms mode and forcing the entry in Line 11 on Schedule 3.
This will void the computation guarantee, but I am thinking that that is acceptable to you.
Sorry I don't have a better answer.
hi @BillM223. Glad that you're an expert in these WFH techniques!
As for the software, I already paid for TurboTax online. (That's how I noticed that the incorrect forms.) Do I have to repay to get the CD/Download version? Thank you.
I would encourage you to contact our phone support people and see if you can persuade them to push a copy of the CD/download software to you. Explain that you have paid for Online (have any receipts with order numbers ready), that you have been working with the tax pros in the Community, and that it was suggested to you that you needed a workaround that was available only on the CD/download software.
I can't guarantee that they will send it to you, but it will save you a few bucks if they do.
I have this exact same problem, but with Trinet as my PEO. Have not paid TurboTax yet, would it be better to find a CPA to do to this instead? I'd prefer to use TurboTax, but this seems like a thorny issue.
Turbotax has no known way of filing this electronically, even if using the downloaded version. With the download, you can at least hijack the relevant form, but you'll have to file federal and state by mail.
I did not find a different software, but would be curious if you find something else that works eventually. Thank you.
As explained in the thread, only one employer can issue a W-2. Two employers CANNOT issue one W-2 for the both of them.
Look at the W-2. There should be ONE EIN, that is the employer.
Since you do not have two W-2's, the IRS wants the employer to fix it.
This is an IRS issue, not a TurboTax issue.
@KrisD15, incorrect. See discussion on IRS commentary on Federal Register on this thread.
@KrisD15 I don't particularly care if this is an IRS issue or a TurboTax issue.
I need to file my taxes and I would like to maximize my refund/credit. If TurboTax can't help me here, then I need to use a local CPA. Which may not end up eating the cost of my full credit anyway... Sigh.
"In summary, the obvious advantage of becoming a CPEO is the continuation of the taxable wage base for FUTA and FICA. The disadvantage for some PEO’s is they become the employer on a federal level now and are responsible for the reporting of the FICA and FUTA taxes. For the client company leaving the PEO, they may also continue the FUTA and FICA taxable wage base reported by the CPEO. In past years, this was not allowed."
Are there any follow up on best solution for this issue? Two options I have considered are:
1. Filing an IRS Form 843 requesting a refund of the excess withholdings, or
2. Claiming a credit for the excess withholding amount in Line 72 of Schedule 5 of
income tax return on Form 1040
The refund of the excess SS tax is now (2019) on line 11 on Schedule 3 (1040); you gave the 2018 location.
For the reasons I gave above (the IRS has issued directions), TurboTax is not making a change to accommodate PEOs this year, not even as a workaround.
I suppose you have another alternative: to buy the CD/download software and manually enter the number on line 11. As I think someone noted above, this will void the Tax Accuracy Calculation Guarantee and may block e-filing, but if the 843 doesn't work for you, it's an alternative...
Thanks! What are the potential issues with Form 843? Do you know whether tax preparers would do Form 843 on its own if the main form has already been filed?
I have not filed a 843 so I have no personal experience with it.
However, as you can see at the IRS website, the form is only one page and not complex.
The most important thing (to me) is that this means that you are telling the IRS that this "employer" is refusing to refund the excess SS tax withheld. This should result in either an abatement to you from the IRS, or the IRS writing a letter to your employer asking them to refund the tax, or else. I am guessing that most employers would like to avoid IRS letters.
In fact, it might help if you asked your PEO for a letter explaining their position and attach it to your request for abatement. Since you are going to name the company anyway, it might motivate them to work with you.
This has happened to me in 2018, and I am still trying to get my overpaid Social Security tax back. I am very curious if any of the people on this thread succeeded in getting their money back and how.
I contacted the PEO who responded with an email:
"The reporting requirements of Section 3511 states that a CPEO will be treated as the employer of any work site employee of the client/customer as reported by the client/customer but only with respect to remuneration remitted. The contract between Domino Data and Sequoia One PEO, LLC allows for the successor and predecessor employer status between the two parties during the term of the service contract. With this designation, the liability of taxes must be handled in the following manner:
Due to this reporting requirement Sequoia One PEO, LLC is listed as the employer and our Federal Employer Identification Number is listed on the W-2, we are required to report taxes on a client by client potentially causing employees to be over withheld for Social Security or under withheld for Medicare. Sequoia One PEO, LLC is unable to report taxes in a manner which does not follow the prescribed requirement under IRS Code 3511, resulting in employees in these situations to obtain the credit directly from the IRS or remit payment to the IRS. Let us know if you have questions."
I filed form 843, attaching the email as supporting documentation.
6 months later (August 2019) I received a rejection from the IRS.
"We are unabled to process your claim for the exempt social security and Medicare withholding tax because you did not submit all of the necessary documentation. You should obtain a refund of the exempt withholding tax from your employer. If you are unable to obtain a refund from your employer you must submit a complete claim." (This is followed by a list of examples of "necessary documentation" that clearly do not apply to my case, like "a copy of the form 8316".
After 3 hours on the phone with the IRS they suggested I file ...
form 843. Again.
I followed their advice to the letter. I did not retain a copy of my first filing of 843 but I am sure the 2nd one was very similar, again accompanied by a - this time, more detailed - email from the PEO.
12 months later, I am receiving another rejection with very similar formulas, making me suspect whoever reviewed my case did not have a clue.
This is fun.
I have had this exact same scenario with TriNet. They won't refund my money and the IRS bounced my request back. I wonder how many people are having this happen to them and just give up.
Maybe we all need to get together and file a class action lawsuit or something to get our money back.