Texas teachers do not pay into social security. Why do I keep getting penalized on my federal return?

[RobbieM]

Because I pay into TRS instead of social security, my return is drastically diminished.

[xmasbaby0 · Accepted solution]

No, your refund is not being affected by Social Security.   You are misinterpreting something.  The software does not use Social Security withheld to calculate your refund/tax due unless you had excess SS withheld by several employers.   Otherwise it is not even used in the calculations.   TurboTax is well aware that many teachers do not pay into Social Security because they pay in to Teachers Retirement instead.    When you enter your W-2, the software uses the income amount from your box 1.   Your W-2 shows that you paid into TRS.  Enter the W-2 exactly as it appears.

[xmasbaby0]

Teachers and Social Security

There are 15 states (AK, CA, CO, CT, IL, LA, MA, ME, MO, NV, OH, TX) in which teachers do not pay in to Social Security, so you will not see Social Security withheld on the teacher’s W-2.  Instead, teachers in those states pay in to a Teacher’s Retirement System, which will show up elsewhere on the W-2 often in box 12 or box 14.

There are three states which have varying degrees of participation in SS for teachers, depending on school districts—GA, KY, and RI.

Why Does Social Security Leave Out Teachers in These 15 States?  

Some state government employees, including teachers, don't pay Social Security payroll taxes and aren't entitled to retirement benefits from Social Security. The history of this practice dates all the way back to Social Security's formation, when the law was intended to cover only private employees. At the time, it wasn't clear whether the federal government could force states to pay payroll taxes. Only in the 1950s did the rules change, allowing states to have the ability to join Social Security.

The majority of states elected to enroll their government workers in Social Security. At that point, those workers started paying payroll taxes, and they earned their retirement benefits in the same way as any other worker.

However, not every state participated. Now teachers in 12 states -- Alaska, California, Colorado, Connecticut, Illinois, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, and Texas -- don't have coverage arrangements with Social Security. In addition, three other states -- Georgia, Kentucky, and Rhode Island -- have varying degrees of coverage that differ by school district.

[KTK]

So my spouse is a California teacher (non K-12; higher education). I noticed there is no federal income tax withheld on their W-2 and it says EXEMPT on their tax status when they look up on their school's website for employees.

So when I create a joint-filing, I noticed the federal tax liability is significantly higher. Is there a way to adjust to make note of this exemption (if any?) or do we need to do our taxes as married, but filed separately? Thanks!

[JohnW152]

No, you shouldn’t file married filing separately because of this.  Your combined federal tax liability would most likely be more if you filed separately.

The EXEMPT tax status might affect whether your spouse has Social Security withheld from their income, but federal income tax withholding should be taken out when you’re dealing with taxable income.  If box 2 on your Form W-2 shows EXEMPT for Federal income tax withheld, that’s what’s causing your problem.  

Just to be clear:  You’re going to have X amount of tax liability, no matter what the withholding amount, but you need withholding on your spouse’s Form W-2 to offset that tax liability, decreasing the amount of tax owed, or generating a refund.

You can do this in TurboTax -- please see the TurboTax Help article How do I update my 2022 withholdings and print a new W-4? for more information.

@KTK
 

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[dodlac1]

There are about 15 school districts in Texas that teachers participate in TRS teachers retirement system AND have SS taken from their paychecks. Austin ISD being one of the largest ones. 

[rick1820]

Hi there: My wife pays up to $250 into TRS per pay period, but that does not show up on box 12 or 14 on the w-2. Also, due to the fact that Box 3 and 4 are empty, her tax liability is more. Is there a way to have TRS contributions appear on out tax returns?

[xmasbaby0]

No---the empty boxes 3 and 4 are not increasing her tax liability.  Her tax liability is determined by the amount of income she has in box 1 and the amounts shown as withheld in box 2-----along with the other factors such as filing status, dependents, etc. etc. etc. 

There are lots of teachers in the U.S. who do not pay in to Social Security, because instead they pay in to a Teachers Retirement System.

Teachers and Social Security

There are 15 states (AK, CA, CO, CT, IL, LA, MA, ME, MO, NV, OH, TX) in which teachers do not pay in to Social Security, so you will not see Social Security withheld on the teacher’s W-2.  Instead, teachers in those states pay in to a Teacher’s Retirement System, which will show up elsewhere on the W-2 often in box 12 or box 14.

There are three states which have varying degrees of participation in SS for teachers, depending on school districts—GA, KY, and RI.

Why Does Social Security Leave Out Teachers in These 15 States?  

Some state government employees, including teachers, don't pay Social Security payroll taxes and aren't entitled to retirement benefits from Social Security. The history of this practice dates all the way back to Social Security's formation, when the law was intended to cover only private employees. At the time, it wasn't clear whether the federal government could force states to pay payroll taxes. Only in the 1950s did the rules change, allowing states to have the ability to join Social Security.

The majority of states elected to enroll their government workers in Social Security. At that point, those workers started paying payroll taxes, and they earned their retirement benefits in the same way as any other worker.

However, not every state participated. Now teachers in 12 states -- Alaska, California, Colorado, Connecticut, Illinois, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, and Texas -- don't have coverage arrangements with Social Security. In addition, three other states -- Georgia, Kentucky, and Rhode Island -- have varying degrees of coverage that differ by school district.

[dodlac1]

The statement that Texas teachers do not contribute to Social Security should be changed to group the state with the 3 that do participate according to school districts not the ones that do not participate at all. AustinISD teachers contribute to both TRS and SS.