FICA Tax Question - The Hull Truth

Menzies · 02-25-2010, 07:09 PM

The maximum FICA that will be taken in 2010 is $6,621, Once you reach that you don't pay anymore this year.

However if you change jobs and join another company, even if a separate legal subsiduary under the same parent company, the withdrawal starts again.

So if you reached the maximum and stopped paying, then moved to a new legal entity, they willl start taking FICA again. In fact if your salary is large enough you could end up paying $13,242. then have to wait until you file your tax return to get it back.

Question: is this mandated by law? Or is it a limitation of payroll systems? I would have thought today's payroll systems would be smart enough to be able to recognize the fact that you have already paid and prevent the double dipping.

FloriBama · 02-25-2010, 07:48 PM

Employers are required by law to withhold up to the maximum amount, without factoring in withholdings from your other employers. You'll claim the credit for the overpayment amount when you file your return as noted in the attached link.

http://www.irs.gov/taxtopics/tc751.html

But what you can do, if you know you're going to exceed the maximum annual FICA withholding amount, is to decrease your total Federal Income Tax withholding values (by increasing your exemptions) in order to counteract the effect of this overpayment.

GWcpa · 02-25-2010, 08:08 PM

The second employer would like to not pay the SS match again as well. They can't get that back.

I agree, I don't know of any reg that allows an HR clerk to look at your old paystub and overide withholding. There is no block on the 941 to reconcile this or box on the W-2 for a credit for FICA previously paid.

Good idea to drop your w4 withholding to compensate for the overpayment.

But a solution is coming. The president would like to remove the FICA limit to tax all wages. Problem solved.

t500hps · 02-25-2010, 08:29 PM

Quote:

Originally Posted by GWcpa

The second employer would like to not pay the SS match again as well. They can't get that back.

..........

If you made the $250K all at one employer and stopped paying at the $6,621 ceiling, your employers does not get to stop paying after that....he continues to pay his matching FICA for every dollar you make period. Changing jobs doesn't net the second employer any "discount" either way.

JALICHTY · 02-25-2010, 08:32 PM

The government gets to double dip, not the employers. If you had three jobs, the government would get three matching employer payments while you would get to credit the amount withheld, above the first time around, to your payments on income tax and, hopefully, get a refund. Also, you don't get credit for making more than the base SS amount for your later Social Security payments.

GWcpa · 02-25-2010, 08:39 PM

Quote:

Originally Posted by t500hps

If you made the $250K all at one employer and stopped paying at the $6,621 ceiling, your employers does not get to stop paying after that....he continues to pay his matching FICA for every dollar you make period. Changing jobs doesn't net the second employer any "discount" either way.

Do you mean just Medicare (which has no cap for either) or SSI? The employer has the same $6621.60 limit as the employee, thank goodness...

cudacat · 02-25-2010, 08:52 PM

All true unless you work for the Fed Govt and pay into civil service retirement system (no FICA) and also work for a non-federal job, you will pay FICA to the maximum withholding amount, with no refund possible. Then when you retire, if you don't have 30 years FICA payment, the Govt will withhold around 60% of your social security payments. You end up paying in twice as much and then get penalized for it again when you draw social security. Of course, I realize on this forum, any kind of retirement benefits paid to a Govt Employee would be considered a waste of money.

JALICHTY · 02-26-2010, 07:06 AM

cuda, I don't believe anybody here on this thread said anything about retirement benefits to a government employee being a waste of money. In fact, I think a large number of folks here on this site would welcome a whole lot more government employees on retirement and less out there "working" for us.

Now, back to the thread, that reduction in Social Security was passed during the Reagan years by a Democrat House and Senate to "fix" Social Security. You see what they have accomplished so far. Apparently, the "Anointed One" does now want to raise the cap on Social Security to tax those terrible people who make more than $100,000 or so plus so he can get more money into the system and "fix" Social Security once and for all. If we keep losing jobs like we have been this last two years, there won't be enough wage earners to even carry Social Security until it's expected date of bankruptcy up in 2040 or so.