We recently were asked:
What happens when taxpayers overfund social security taxes that are withheld from pay from multiple employers in the same calendar year?
Every employer is required to withhold social security taxes from an employee’s pay until that employee’s wages reach a max limit ($147,000 for 2022). Withheld social security taxes are 6.2% of employee pay. The employee’s withheld amount is submitted to the IRS each pay period. The company matches that withheld amount as well, known as company payroll taxes, and submits their matching portion to the IRS each pay period.
Once an employee’s wages hit the max limit for the year, no additional social security taxes are withheld from pay and the company no longer has a payroll tax obligation pertaining to matching social security taxes for the employee for the remainder of the calendar year. The social security max withholding per employee for 2022 is $9,114 ($147,000 X 6.2%). Each employer is required to assume that they are an employee’s only employer and therefore each employer withholds the social security taxes from each employee’s pay to the max limit ($9,114).
An employee cannot ask his/her employer to stop social security taxes from being withheld from pay because that employee already reached the annual max withheld at a different employer within the year. If a taxpayer has multiple employers and has withheld more than $9,114 in total for social security taxes from all employers over the span of the calendar year, the amount in excess of $9,114 for the taxpayer for 2022 will count as additional federal taxes withheld from their pay when the taxpayer prepares their personal income tax return. However, the employer(s) matching portion that is submitted to the IRS as payroll taxes over the course of the year (from all employers) is not refunded back to any of the employers when an employee exceeds the annual withheld cap.