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How to recoup FICA tax overpayments

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in Small Business Tax,Small Business Tax Deduction Strategies

Common occurrence: A worker overpays FICA tax due to a change in jobs or other circumstances. It could easily happen to you or someone else in your family.

Strategy: Obtain timely tax relief. Depending on the situation, you might use one of three techniques for recovering a FICA overpayment.

Remember that FICA is composed of Social Security tax and Medicare tax. For 2015, the Social Secu­­rity tax is 6.2% on the first $118,500 of wages. (This wage ceiling remains the same in 2016.) The 1.45% Medicare tax applies to all wages, and an additional 0.9% Medicare tax kicks in if your wages exceed the applicable threshold.

Thus, if you earned $150,000 in wages in 2015, you must pay $7,347 (6.2% of $118,500 plus $2,175 (1.45% of $150,000) for a total FICA tax of $9,522. The rate percentages are doubled for self-employment tax—the equivalent of FICA for self-employed individuals—but half of the tax (excluding the additional 0.9% Medicare tax if applicable) is deductible.

If you’re married and file a joint return, excess FICA tax payments must be computed separately for each spouse. Keeping that in mind, there are three possible options for recovering excess FICA tax paid last year.

1.  Claim a credit. An overpayment may occur when an individual works for more than one employer for the year. If there was a mistake, the onus is on you to request a credit on your 2015 return. The credit is claimed on Line 71 of Form 1040.

2.  Seek an employer refund. When you’re preparing returns for 2015, you may notice that more FICA tax was withheld from your paychecks in 2015 than should have been, even though you’re worked for just one employer. Although you can’t claim a credit on your Form 1040, you can ask your employer to make an adjustment to eliminate the overpayment.

3.  Offset self-employment tax with wages. Suppose you run a self-employed business in addition to a regular job. In this case, you can use any FICA overwithholding to reduce the self-employment tax that is due.

Tip: Use the worksheet in Pub. 505, Tax With­­hold­­ing and Estimated Tax, to compute any excess FICA tax.  

{ 2 comments… read them below or add one }

Abe Eddit January 3, 2016 at 4:24 am

I have two concurrent jobs. My first job provides me a salary of $100,000 as W-2. In addition, I’m the sole owner and sole employee of a C-corp that provides me an additional W-2 of $50,000. Combined, my salary is $150,000, and I understand I can claim a credit for the EMPLOYEE social security tax beyond $118,500, i.e., EMPLOYEE social security tax on $31,500. However, what about the EMPLOYER social security tax on the $31,500? Can my C-corp claim that back somehow? Do my C-corp even need to pay it when it issues my salary?

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Bad News For You August 22, 2017 at 11:55 pm

Nope, If you as the employee have more SS taken out than the wage base, you can claim a refund on your personal taxes via 1040. Both employers need to pay SS on the entire wage base an employee earns from THEIR corporation/company. So if you earn $120,000 from both, they BOTH pay $7,440, you pay only ~$7886 personally, and get the remaining ~$7000 back on your 1040. If you worked for only one company and made $240,000 total, you’d both pay the max of ~$7880.

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