How to Recover Excess FICA Payments

Have you ever switched jobs in the middle of a year? If so, and if you earn a decent salary, you may have over-paid your FICA tax and have a refund due. Here are the details from Yahoo on how to recover excess FICA payments:

In 2006, Social Security was collected on your earnings up to $94,200.

If you earned this much at one job last year, you put in almost $5,840.40 that was matched by your boss. In this situation, the math is straightforward. Once your pay went over the limit, your payroll manager stopped withholding the tax and your take-home pay got a bit bigger.

But if you changed jobs and your combined income from both employers went over the limit, you probably overpaid your Social Security taxes. This is because the second company also withheld the tax, unaware of how much a previous employer had already collected.

You can get back the excess Social Security that was withheld when you file.

If you file Form 1040, line 67 of the form is where you'll get credit for your overpayments. Simply add the amounts of Social Security withholding reported by each employer on your W-2s and subtract $5,840.40. The result goes on this line, to be included in your total tax payments.

You also can claim the overpayment if you file the shorter 1040A. While it's not specifically noted on the return, the form's instructions (Page 53) tell taxpayers to enter their Social Security tax overpayments on line 43.

This has happened to me in the past. I realized it was happening and tried to get my second employer to decrease the rate of FICA payments but was told "we don't do that." (Maybe implying I was trying something illegal?) So I simply jotted it down on my tax notes, handed it to my CPA, and she took care of it at tax time.

Just another advantage of having a CPA do your taxes. ;-)

Comments

[treacherous]

I sure wish that President Bush and the Republicans in Congress had stuck to their guns about reforming Social Security. But I wish they'd gone even further to create *voluntary* 401k type retirement accounts with employer matching funds. Imagine the amount of millionaire retirees this could create 40 years from now!

[Hong Tran]

Actually, your new employer is not allowed to withhold less in FICA. They pay the same amount as you do (7.65% SS and Medicare) and don't get the credit back at the end of the year. If they withheld less because you switched jobs, they would be illegaly paying less of their share in FICA taxes.