Last year, I worked for two employers (numbers are approximate) and they withheld SS taxes like
Employer A : $8,000
Employer B : $2,000.
Technically, I paid excess tax of
10000 - (142800 * .062) = $1146.40
This is appearing in my 1040. Schedule 3, line 11 as excess amount.
But, the employer portion also overpaid, right? Where is the calculation for it? I don't see it in any of the worksheet and line number. Is Turbotax doing it right?
In the first place you didn't pay the employer 6.2% part so it doesn't go on your return. And the employer doesn't get a refund for it either. You only get back from what you paid in on your W2 box 4.
Are you asking about 2021 or 2022? FYI - For 2022 the max for Social Security is $9,114.00 on $147,000 of wages (147,000 x 6.2%).
I am asking about my 2021 return. I do get the same situation in 2022 too. When I am estimating my 2022 taxes, I came across this calculation.
Let me add another information on my situation. The Employer B is my own company. My payroll provider paid the SS tax of both employer and employee portions. Now, you better understand my situation !!!!
Sorry but NO EMPLOYER no matter who they are can get a refund of the employer portion of the FICA taxes they pay for any employee. There is no way to do it ... the SSA/Medicare systems get to keep what you may think is excess but it is not. All employers must pay the employer's portion of the FICA taxes until that employee reaches the max for the year for THAT employer. The fact that the employee had other wages from other employers is immaterial. Only the employee has a way to get the excess withholding refunded ... the employers do not.
Read the form and the instructions :
5a. Taxable social security wages. Enter the total wages,
including qualified sick leave wages and qualified family
leave wages paid this quarter of 2022 for leave taken after
March 31, 2021, and before October 1, 2021; sick pay; and
taxable fringe benefits subject to social security taxes you
paid to your employees during the quarter. Don't include the
qualified sick leave wages paid this quarter of 2022 that are
reported on line 5a(i) or qualified family leave wages paid this
quarter of 2022 that are reported on line 5a(ii) for leave taken
after March 31, 2020, and before April 1, 2021. For this
purpose, sick pay includes payments made by an insurance
company to your employees for which you received timely
notice from the insurance company. See section 6 of Pub.
15-A for more information about sick pay reporting. See the
instructions for line 8 for an adjustment that you may need to
make on Form 941 for sick pay.
Enter the amount before payroll deductions. Don't include
tips on this line. For information on types of wages subject to
social security taxes, see section 5 of Pub. 15.
For 2022, the rate of social security tax on taxable wages,
except for qualified sick leave wages and qualified family
leave wages paid in 2022 for leave taken after March 31,
2020, and before April 1, 2021, is 6.2% (0.062) each for the
employer and employee or 12.4% (0.124) for both. Stop
paying social security tax on and entering an employee's
wages on line 5a when the employee's taxable wages,
including qualified sick leave wages paid in 2022 that are
reported on line 5a(i), qualified family leave wages paid in
2022 that are reported on line 5a(ii), and tips, reach $147,000
for the year. However, continue to withhold income and
Medicare taxes for the whole year on all wages, including
qualified sick leave wages paid in 2022, qualified family leave
wages paid in 2022, and tips, even when the social security
wage base of $147,000 has been reached.
I just talked to an IRS agent. Since the overpaid SS involves multiple employers, IRS can't determine the overpaid amount for a specific employee worked for both employers.
As one of the employer is myself. I can file 941-x, to claim the excess social security tax of employer portion.
In the form 941-X.
Part -1, select 2.
Claim. Check this box if you overreported tax amounts only and you would like to use
the claim process to ask for a refund or abatement of the amount shown on line 27.
Don’t check this box if you’re correcting ANY underreported tax amounts on this form.
Part 2 - Select 3.
I certify that I’ve filed or will file Forms W-2, Wage and Tax Statement, or Forms W-2c, Corrected Wage and Tax Statement, as required
Part 2 - Select 5 c
The claim for social security tax and Medicare tax is for the employer’s share only. I couldn’t find the affected employees, or each affected employee didn’t give me a written consent to file a claim for the employee’s share of social security tax and Medicare tax, or each affected employee didn’t give me a written statement that he or she hasn’t claimed (or the claim was rejected) and won’t claim a refund or credit for the overcollection.
Part 3 - Line 8.
Enter the corrected values, Column 4 should negative, that shows the excess overpaid tax
That value will be reflected in line 23 and line 27.
I highly believe you got incorrect information from the IRS (which is extremely common) either because they did not understand your question and/or they did not actually know... but do as you please.
I suggest you call an actual payroll company like ADP or PAYCHEX and ask them first.
My Payroll provider is Gusto. In the first place, they asked me to contact IRS/SS for this issue.
If IRS is over collecting Social security taxes from multiple employers, they should provide a process to return it. IRS may know this issue. Until the money is with them, it is not their headache.
Ok ... once again each employer is treated separately when paying in FICA taxes for their employees and this has been the way it has been forever. Each employer will pay in until their employee has reached the maximum on the form 941 and a payroll company should know this. There are two solutions for an employee getting back the excess paid in but not for the employer. The actions you describe to get back the excess FICA taxes was if your businsess messed up and kept paying/withholding when your employee hit the maximum limit to cause an excess to be paid in ... but you did not hit the limit with that employer (your business). I doubt the IRS will allow you a credit where none is due but try if you like. You noticed this simply because you are one of your own employers ... most folks never see it like you did and kudos for recognizing the inequity of the system but that is just the way the rules have always been written ... it favors the SS administration and not you as an employer.
Also ... FYI ... the IRS never sees the FICA taxes collected ... those go to the SSA (note where the 941 is filed to). Congress wrote the rules in their favor so if you want to complain to someone call your congress person however I doubt any of them will correct this intentional rule to pad the SSA coffiers.
I believe that if you amend your form 941, you will also have to file a corrected W-2 for yourself and a corrected W-3 for the company so everything goes together. That will mean reporting on the W-2 that a certain portion of your wages was exempt from SS tax even though you are below the SS wage base. That may not pass review.
The poster did not over pay FICA taxes since neither employer hit the maximum. But since his company is one of the employers he noticted that on the form 1040 the employee could get a refund of the excess SS withheld however there is no such relief for the employers. Each employer must withhold until each of their employees have hit the max required for the year. An amended 941 is only used if the single employer failed to stop withholding and paying the SS portion by mistake. If that was the case then amending the 941 is correct but this is not the case here. An employee could have 5 employers during the year and hit the limit with each and every employer and each separate employer had to withhold/pay up to the max per the 941 rules. And even though the employee can get back the excess SS withheld there is no such provision for the employers who ususally have no idea they overpaid. Just because this poster is an employee of his own corporation he noticed it and caught onto a little known "gottcha" by congress ... a way they can pad the SSA coffiers that they can use for other things ... I highly doubt they will ever change that even if they have a desire to do so and logistically it would be a nightmare to implement.
"But, the employer portion also overpaid, right?"
Wrong. Neither employer exceeded the maximum $8,853.60 (for 2021). There is no combined limit for the employer portion of Social Security tax the way there is for the employee portion.
@dmertz and @Critter-3
Do you both agree that total payroll taxes should be 12.4%?
According to IRS website.
In my case, it is very clearly crossed total 12.4% of Social security tax. IRS is over collecting taxes here.
Here, my maths is very clear.
You both are creating consensus to make maths wrong.
Yes ... read the 941 & the 941 instructions (posted earlier)... EACH employer will withhold 6.2 from the employee + 6.2 for the employer match until that employee has reached that year's maximum amount. At that time the SS withholding & employer portion stops for that employee for the rest of the year.
Your business did not pay you the max in SS wages so the employer is required to continue to withhold and pay until you hit that max with them ... your having another employer is immaterial to this calculation. I see where you think this is unfair because it is unfair however that is how the rules were written.
Now if your business withheld/paid in too much because your business failed to recognize the limit and actually paid in an excess then and only then can you amend the 941 to get the excess paid in for the employer but you did not indicate that your business paid you more than $142,800 in wages in 2021 or $147,000 in 2022 but if they did then by all means amend the 941. However if the limit was exceeded by the combination of more than one employer you have no basis to amend.
Do you both agree that total payroll taxes should be 12.4%? YES ... 6.2% for the employee and 6.2% for the employer.
According to IRS website.
https://www.irs.gov/taxtopics/tc751#:~:text=The%20current%20tax%20rate%20for,employee%2C%20or%202.9%.... Keep reading ... the limits section.
In my case, it is very clearly crossed total 12.4% of Social security tax. IRS is over collecting taxes here.
Here, my maths is very clear. Yes ... and as an employee (who only pays 1/2 of that 12.4% tax) you can get an excess that was withheld from your paychecks on the form 1040 if you had more than one employer during the year. If you only had one employer during the year and they made the error then they need to correct it and refund your excess withholding to you. However each of the individual employers did not overpay ... each employer withholding/payment is calculated independently of any other employer the employee may have during the year. There is no way arround this fact and no solution to the inequity of it.
"Do you both agree that total payroll taxes should be 12.4%?"
12.4% of what? 12.4% of $142,800 of your total compensation for 2021? No, there is no such limit.
For 2021, the total employee portion of Social Security taxes is limited to 6.2% of up to $142,800 of total compensation. The employer portion is separately limited to 6.2% of up to $142,800 of compensation earned at each separate employer. There is no combined limit for your employers.
12.4% is mentioned nowhere in the tax code (except for the self-employed, which you are not). The tax code specifies 6.2% for each individual (26 USC § 3101(a)) and 6.2% for each employer (26 USC § 3111(a)) . The amount that one of your employers must pay has nothing to do with what what the other of your employers must pay.
Ok Friends. Everything is grey. I have used Turbotax forums to get lot of answers for the past several years. For my situation, I didn't see any fair answer. I am going to try https://www.taxpayeradvocate.irs.gov/. Hope, they will understand my situation and help me. Happy New Year 2023 to all.
It's been answered here very clearly. The employer part does not have a max like the employee part.
I know what the original taxpayer wants to do, I’m pointing out that beyond declaring on form 941 that half their pay is SS-exempt, they will also have to claim the same thing on a corrected W-2 and W-3. More routes to get caught.
(Declaring wages that are exempt from SS tax is not impossible, I filed many 941s for my church, and the church is exempt from from employment tax withholding on the pastor’s salary. But retroactively declaring half someone’s wages as exempt should raise red flags and the corrected W-2 creates an additional path for the situation to be noticed.)