Excess tax due because of incorrect calculation in excess social security tax withheld by multiple employers

[dushdhyani]

We received a mail from IRS that we owe additional tax. The reason stated is "We changed the amount claimed as excess social security tax withheld or tier 1 RRTA witheld on your tax return because you incorrectly calculated the excess amount"

They have attached a sheet in the mail that shows the tax calculations, payments and credits. However, the credits quoted is incorrect and they seem to be ignoring the excess social security tax withheld.

However as per this topic https://www.irs.gov/taxtopics/tc608 , "If you had more than one employer and too much Social Security tax or Tier 1 RRTA tax withheld, you may be able to claim the excess as a credit against your income tax on your income tax return". Could this be due to a confusion regarding the number of employers an individual has had? How exactly does TurboTax communicate to the IRS the details regarding number of employers? How should we be proceeding to handle this scenario?

[VolvoGirl]

You only get excess SS back if one person had more than 1 employer and those employers took out more than the max of  $8,853.60 (for 2021).  Check 1040 Schedule 3 line 11 for it.  Then Schedule 3 goes to 1040 line 31.

Are you married and filed Joint?  And you both had W2s?  The IRS is probably right.  They usually are in this case.  You assigned both spouse's W2 to the same person so it looked like that person went over the max.

For 2021, Do you still have copies of all the W2s?  Look at box 4.  Did either of you have more than 1 employer?  You only get excess SS back if one person had more than 1 employer and those employers took out more than the max of  $8,853.60.  So add up your W2 box 4.  Is it more?  Then add up your spouse's W2 box 4.  Is their box 4 more than $8,853.60?

Or check W2 box 12.  You may have entered Code A by mistake.

[rjs]

What year is the IRS notice for? I think it's a little early for them to be sending this type of notice for 2021. For 2020 the maximum Social Security tax is $8,537.40.

Did you file as married filing jointly for the year in question? If so, the maximum and the credit, if any, are calculated separately for each person. The maximum amount is per person. If you and your spouse each had only one employer, then neither of you had multiple employers, so you do not have any excess Social Security tax withheld, and you are not entitled to the credit.

If any one employer withheld more than the maximum, you have to get the excess back from the employer. You cannot claim a credit for it on your tax return. You can only get credit on your tax return if each employer withheld no more than the maximum, but the total withheld by all employers is more than the maximum. Again, this is calculated separately for each person on a joint return.

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@dushdhyani wrote:

How exactly does TurboTax communicate to the IRS the details regarding number of employers?

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TurboTax does not communicate the number of employers to the IRS. The IRS gets copies of your W-2s from your employers, so the IRS knows how many employers each of you had, and how much Social Security tax each employer withheld.

[dushdhyani]

My wife changed employers mid year and has a total of 3 W2's from 2 employers. The sum total of Box 4 on the 3 W2's is 10557.55.  I have a single W2 and the amount in Box 4 is 8853.60 .

We simply uploaded our W2's in TurboTax and seems like it made the calculations correctly.

Also, none of the W2's say Code A in box 12

[dushdhyani]

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@rjs wrote:

What year is the IRS notice for? I think it's a little early for them to be sending this type of notice for 2021.

The notice says CP11 at the top and the tax year is 2021

[Mike9241]

we can't see your wife's W-2s.  however, if one employer took out more than the maximum in social security taxes, you don't get an income tax return credit. you have to get back the excess from the employer.   can you explain why one employer issued two W-2s?   sometimes there can be a problem if multiple employers use a common paymaster where it's their EIN number on the W-2 

[VolvoGirl]

@dushdhyani   How much excess did you have on 1040 Schedule 3 line 11?   Should be 1704.  How much did they reduce it?  Maybe it imported all the W2s under the same person so your box 4 (the max) got added in with hers.

Why did she get 2 W2s from the same employer?  Do they have the same EIN in box b?  

And I meant for box 12 you might have accidentally selected Code A instead of the right code.  After you import any W2 or 1099 forms you need to check that they imported right.  It can be wrong.  

[bmjptc]

I have also received this letter for tax year 2021. I had two employers and exceeded the social security wages threshold in total, and had $11k withheld total ($2321 over the $8853 max). I see the difference is shown appropriately on line 11 of schedule 3, but I have received a letter from the IRS stating that I inappropriately took too much as excess social security. This math seems fairly cut and dried but I can't reach anyone at the IRS and I don't have enough visibility into TurboTax anymore to see where it may have gone wrong. Can I somehow view the W2's that imported after I filed to check for import errors? Or is this possibly a TurboTax calculation problem?

[NCperson]

@bmjptc - there is another post from a few days ago with the same issue.... the taxpayer indicated that they called the IRS and the IRS admitted their mistake! Maybe you have the same issue?

I would just make sure you don't have the same EIN against multiple W-2s inadvertantly. 

[bmjptc]

I actually got three W-2's last year from two different employers.

Employer 1 issued me one W-2 for the first half of the year.

Employer 2 employed me for the second half of the year, but due to a change in their ownership in third quarter, I was given two separate W-2s (one for old ownership and one for new ownership) with the same EIN.  The total SS withholding on all three adds up to the Turbotax included amount.

Could that be the issue?

[NCperson]

does the SS withholdings on Employer 2, across the 2 W-2s, exceed the $8853?  if yes, the IRS would expect that money to be adjusted and refunded by the employer. 

check all three EIN's - are they unique? 

[bmjptc]

It does not.

Employer 1 withheld $7461 on a single W-2

Employer 2 withheld $3712 total over two separate W-2s

The amount they are indicating I withheld in excess is the amount from just one of Employer 2's W-2s.

[NCperson]

@bmjptc - then if there are similar EINs that take you over the cap, you have to get the money back from the employer.....

[VolvoGirl]

That one is tricky since neither employer went over.   The new owner probably should have gotten a new EIN.