Social Security Tax on Everything?

Q.  I have a full-time and a part-time job with different companies.  My employers are both taking out Social Security tax.  Is this correct?

A. Good Question! There are several common misconceptions about Social Security withholding from a paycheck. This is probably one of the biggest. The answer is….a resounding YES!!! Each employer of record is required to withholding 6.2% of your taxable wage for Social Security purposes up to the annual limit.  That is $106,800 for 2010. Even if you have 5 jobs at once, each employer is required to withhold this amount. Even if you are retired and collecting Social Security and have a job somewhere just for fun, the employer is still required to withhold Social Security tax.

You may ask, “What happens if the income from all my jobs add up to more than that limit?  Can I get all my employers to stop withholding Social Security?”  The answer is no.  You do have the ability to get a refund on your tax return if the total Social Security tax paid during the year was more than the maximum required.  That is $6621.60 for 2010.  You’ll see this on line 69 of the 1040 form.  The biggest drawback to this is that the multiple employers are not permitted to recover the overpaid Social Security.  They will match 6.2% up to the limit for everyone regardless whether that employee will be refunded overpaid tax later in the year.

Form 941 Filing Instructions

Q. Where do I send my Quarterly 941 form? Does it go to the bank?

A. The Form 941 is for employers to report the amount of federal, Social Security and Medicare tax withheld from employees for the quarter. If your company uses a payroll service, filing this form should be part of the package and either prepared or filed for you. If you are processing payroll on your own, the IRS should have included instructions with the 941 form. These instructions will help you complete the fields on the form. They will also provide filing addresses.

My company has filed electronically for so long, that I am a little out of touch with the paper procedures. However, in the old days before we electronically filed, an envelope was included with the 941 package. This envelope had two labels attached. One was to be used if you were returning this form with money enclosed. The other was to be used if you already made your deposits at the bank or through EFTPS and were just returning the completed form.

If you lost the envelope, the instructions tell you where to mail the completed form starting on page 4. In case you don’t have the instructions, you can download a copy here.