Social Security tax withheld

[uniformgc1177]

My employer is taking 6.2% of social security wages in box 3 plus taking another 6.2% in box 7 which is tips.

I'm trying to convince her that Social Security taxes withhold is only for box 3.  

It's showing I overpaid way too much, but she's telling me that her way is right.  I know she's wrong and it's costing me $1300.00 in overpayment.

Can someone verify that I am right and she is wrong about this post@

Thank you.

[Vanessa A]

Box 7 is your social security tips.  Box 7 and box 3 should equal box 1 for your total wages.   Social security should be withheld on box 7 as well as box 3.  So she is actually right. 

Basically as a tipped employee, your wages are accounted for slightly different on your W-2, as they are split up, but it is all still subject to SS.  If you multiply box 1 (assuming you have no retirement or other benefits that is not taxed) by 6.2% you should still come up with the right amount. 

When you enter everything in TurboTax does it tell you that you had too much withheld?

[VolvoGirl]

See W2 instructions page 19 for box 4.  

https://www.irs.gov/pub/irs-pdf/iw2w3.pdf 

Says.....

Show the total employee social security tax (not your share) withheld, including social security tax on tips. 

[Opus 17]

Tips are considered part of your compensation for work that you perform. Because of this, your employer is required to withhold social security tax on your tips as well as your base wage.   The good news is that this increases your credits with the social security system for disability or retirement benefits.  

However, if you are subject to "tip-outs" or tip sharing, where some of your tips are shared with other staff, when you report tips to your employer, you should only report the tips you got to keep, and not the entire amount.  If you reported too much tips in the past, this is fairly difficult to fix, but going forward, you should only report the tips you keep. 

[fanfare]

@Opus 17 

How do you report only the tips you keep if your W-2 improperly reports you kept all tips.?

[Opus 17]

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@fanfare wrote:

@Opus 17 

How do you report only the tips you keep if your W-2 (incorrectly) reports you kept all tips.?

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There is no official procedure to fix that error.  The taxpayer should first ask their employer for a corrected W-2.  If refused, the taxpayer could attempt to file with a substitute W-2 (form 4852) reporting what they believe to be correct, but they will need proof because the IRS is likely to ask questions.  The correct procedure is that when you report your tips to your employer (there may be a paper log or electronic system) you only report the net you keep after "tip-outs."  

[fanfare]

basically, the employee is screwed if the employer does not handle tip-outs correctly.

This is a common problem.

[Opus 17]

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@fanfare wrote:

basically, the employee is screwed if the employer does not handle tip-outs correctly.

This is a common problem.

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The employee has a responsibility too.  I would be asking about the discrepancy after the first or second pay stub.   I don't know how it is done today, with most tips on the credit card, but in the past, the employee had to voluntarily disclose their tips at the end of every shift, so it was mainly their responsibility to report the net, not the gross.