Switching employers mid-year often results in a overpaying withheld social security taxes.
For tax year 2021, once an employee earns $142,800 from an employer, social security taxes are no longer withheld. This results in a max social security tax withheld from pay of $8,853.60. If a taxpayer works more than one job and combined wages exceed $142,800 from multiple employers in 2021, then more than the max social security withheld tax limit per individual, $8,853.60, will be withheld for the taxpayer. However, this excess withholding amount is not lost, but will count as additional withheld federal taxes paid for the year. A taxpayer will receive this tax credit when filing their personal tax return for that calendar year.
Keep in mind that knowing that the max withheld social security tax has been reached at one employer in the year does not allow a taxpayer to request the second employer to stop withholding social security taxes from their pay at the new job. Each employer acts independently and assumes that they are your only employer in the year with regard to withholding social security taxes from your pay.
What happens to the excess social security tax that each employer pays on your behalf? If you have 2 employers, they each pay the maximum on your behalf into your account. Do you get credit for that? The government seems to receive that money and uses it, but I do not think they refund it or even credit it to your account. It seems like a free unaccounted gift to the government. Where can we even see where that amount is recorded?
Hi Ross, the quick answer is any excess social security tax you’ve paid counts on your tax return as federal taxes you’ve paid. If you’ve overpaid towards the total taxes you owed, you would receive a refund.
One of our Partners explained it more fully –
Every employer is required to withhold social security taxes from an employee’s pay until that employee’s wages reach a max limit ($147,000 for 2022). Withheld social security taxes are 6.2% of employee pay. The withheld amount is submitted to the IRS each pay period. The company matches that withheld amount as well, known as company payroll taxes, and submits their matching portion to the IRS each pay period. Once an employee’s wages hit the max limit for the year, no additional social security taxes are withheld from pay and the company no longer has a payroll tax obligation pertaining to matching social security taxes for the employee for the remainder of the calendar year. The social security max withholding per employee for 2022 is $9,114 ($147,000 X 6.2%).
Each employer must assume that they are an employee’s only employer and therefore each employer withholds the social security taxes from each employee’s pay to the max limit ($9,114). An employee cannot ask his/her employer to stop social security taxes from being withheld from pay because the employee already reached the annual max withheld at a different employer within the year. If a taxpayer has multiple employers and has withheld more than $9,114 for social security taxes from all employers over the span of the calendar year, the amount in excess of $9,114 for the taxpayer for 2022 will count as additional federal taxes withheld from their pay when the taxpayer prepares their personal income tax return. However, the employer(s) matching portion that is submitted to the IRS as payroll taxes over the course of the year (from all employers) is not refunded back to any of the employers when an employee exceeds the annual withheld cap.
“the employer(s) matching portion that is submitted to the IRS as payroll taxes over the course of the year (from all employers) is not refunded back”. Employer taxes are not limited by the $147,000 income cap?
Hi Joshua, The employer payroll taxes are capped based on the first $147,000 of each individual employee’s wages. Once an employee earns $147,000 from a specific employer, then both the social security taxes withheld and the employer matching payroll tax portion are no longer paid to the IRS for the remainder of the year by that specific employer for that employee. However, the employer portion does not take into account any other employment earnings by the employee in the calendar year when determining the $147,000 wage cap for each employee being paid by them.
Hello,
You have mentioned that excess social security tax counts towards federal taxes. However, does it mean that it counts toward federal income tax as well? I am asking because, to avoid underpaying penalties tax payer must pay 100% taxes or 110% if income > 150000$. What if tax payer overpaid social security tax let’s say 3000$ (because of two jobs) but at the same time didn’t meet 110% safe harbor that would eliminate underpaid penalty . Difference let’s say 2000$. Would this 3000$ excess social security count towards federal income tax (cover i felt paid 2000$ of income tax) and move it to safe harbor, because it would be > 110% ?
Hi Ansan, The excess social security tax is a refundable federal income tax credit. I believe the amount does beneficially impact the calculation of the safe harbor payments, but I couldn’t easily find specific confirmation for the scenario you detail. Your CPA should be able to investigate further to confirm for your situation.
I worked 2022 and still received ss. My retirement age was last year so I ended up paying money back to ss because of my job. Since my job still took money out for ss , am I allowed to deduct that amount from the net benefit I received from ss.
In response to your final paragraph – Do you have a source you can provide on the fact that employers must pay the employer portion of the tax even if the employee capped at a previous employer during the year?
Hi Garrett, That’s the specific IRS rule so you could search their site if you need the specific language or a reference to site. The overpaid amount only applies to employees working multiple jobs and not to the associated multiple employers.
I have been overpaying FICA for the past two years and also this year, 2022. Can you help me?
Hi Carl, the overpayment should correct itself when your tax returns are prepared (provided they were prepared correctly). Any excess social security tax that you’ve paid in would count towards the total amount of federal taxes you’ve paid in for the year. If you’ve overpaid the total amount of federal taxes you owed, you’d get back a refund.
Hi – What if I earn $180,000 from an employer, and I also have self-employment for an additional $50,000 per year. Can I save on self-employment taxes?
Hi Amber, If you reached the cap of your social security wage base from your employer (wage cap being $147,000 in 2022), then you are not liable to pay the social security tax portion of your self-employment on your self-employment income for 2022 (12.4% social security tax). The Medicare tax portion of self-employment taxes are not capped. In your scenario you would still be responsible for the Medicare tax in the amount of 2.9% on your $50,000 of self-employment income.
Hi – What if I earn $180,000 from an employer, and I also have self-employment income for an additional $50,000 per year, which is coming from a W-2 from my S-Corp? In this scenario, would the $147,000 cap also apply and therefore I would not be liable for social security tax (12.4%) on the self-employment income?
Hi Anthony,
Unfortunately, no, you/the S-Corp would be required to submit the 12.4% to the IRS for payroll taxes. We recommend that you discuss this scenario with your CPA that prepares your S-Corp tax return.
If a second salary is paid as wages through an S-Corp that you own, the S-Corp is still required to withhold the social security taxes from your wages and also match that amount when submitting payroll taxes to the IRS. The 12.4% will be submitted via payroll taxes by your S-Corp. When you file your personal taxes, the 6.2% portion withheld from you W-2 will be considered additional federal taxes paid in. However, the company matching portion of 6.2% will not be refunded.
Hello. I am a military reservist part-time and had almost $2,400 withheld by them for FICA in 2022. My full-time job withheld the maximum ($9,114). I did the computation and am due a refund of about $1,950 even though I paid about $2,400 in FICA with the military job. Block 1 on my military W2 is almost $34,000 and block 3 is about $31,500. Is it correct that if one has two jobs and combined overpays the FICA limit, that overpaid amount isn’t refunded 100%? In my case it’s only about 82% ($1,950 vs $2,400 paid). This is a big difference and I haven’t realized this in past years even though it has been happening for as long as I have had both jobs. Thanks for any clarification.
If the employer (ME) filed all taxes properly, but the overpayment of social security taxes withheld is because the employee worked multiple jobs during the 2022 year and had already hit the tax limit:
1) Am I required to provide a refund?
Is there any acceptable reason that I can deny the request and then the employee will have to deal with the IRS to either claim the excess credit against income taxes or request the refund via form 843?
Side note: If I go in a make adjustments and I have already submitted my w3 electronically, I will have to now submit a corrected w3.
Hello, is 147,000$ wage counter accumulated through the years or recount from zero every year? I mean if I got from my employer for the first year 40,000$, and in a second year 107,000$ then I reach the Max 147,000$ then dose the social security taxes are no longer withheld?
It’s an annual cap that resets every year, not a lifetime cap.
Does any excess paid beyond the annual limit count toward calculating your benefit upon retirement and collecting social security? Specifically can an individual’s retirement benefit be more than the 35 year maximum if the sum of the employer’s contribution is more than a 35 year maximum?
The annual max for wages subject to Social Security taxes is the maximum for annual wage credits for your social security benefits calculation as well. No matter how much you earn, therefore, you can’t exceed the maximum wage base in any year.
Hello I have 2 jobs but both employers does not know I work for the other employer, I have paid $4000 excess social security tax. My question is do IRS pay back the employers as well. if yes which one. I just want to avoid the situation where the employer found out I have a second job
I worked for 2 employers switching jobs midway through the year, my spouse worked for 1 and also had self employment income. Does the $147,000 apply to the combined wages for both of us? Am I I eligible to receive a credit because the combined SS taxes withheld on jobs held by both me and spouse exceed the $9,114 limit for 2022? None of us individually made $147K.
If your salary was $200k and your Employer deducted the max would you still have to pay self employment tax on the earning of an LLC that you were a Member/Manager and if so would you earn a credit on the amount overpaid for SS?