Excess Social Security and Tier 1 RRTA tax Withheld

As discussed previously, the United States government utilizes a withholding system to maximize its tax collection efforts. Under the system, most employers1 are required to withhold a particular percentage of employee earnings to sufficiently fund its Social Security program.

Social Security withholding, for the most part, occurs at such a rate that an appropriate amount of income is withheld from each employee’s paychecks. High earning taxpayers, however, may be entitled to a tax credit when employers withhold too large of Social Security amounts. Line 69 of Form 1040 permits taxpayers (and/or their spouse if filing a joint return) with (1) more than one employer in 2012 and (2) total wages exceeding $110,100 to claim a credit for superfluous Social Security and/or Tier 1 railroad retirement (RRTA) withholdings2. Eligible taxpayers can take this credit for any amount withheld in excess of $4,624.

NOTE: If any one employer withheld more than $4,624, a taxpayer cannot claim this credit. Instead, the over-collecting employer should personally adjust the error. If the employer fails to do so, the taxpayer may file a claim for refund using Form 843.

1In some cases, the federal government and state and local governments do not have to withhold social security tax from their employees’ wages.
2Taxpayers cannot claim a refund for excess Tier 2 RRTA tax on Form 1040. Instead, use Form 843.

Photo by: SalFalko