Author Topic: Social Security overpayment, Federal withholdings, and the child tax credit  (Read 395 times)

protostache

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My employer switched from doing their own payroll to using a PEO mid-year this year. This happened to be the month after I hit the Social Security wage base for the year. The PEO has a different EIN, obviously, so my wage base started over.

This is pretty annoying, but my understanding is that I'll get the overpayment back when we file taxes. I've read that I can change my Federal withholdings to match my total tax liability. Is that a viable strategy? If so, are there any calculators out there that would help me figure out what I should set my allowances at?

A related question: my wife is due with our second child on January 1st 2019, but based on how the first pregnancy went we don't expect her to go to full term. How should a potential second child tax credit factor into my withholding settings?

secondcor521

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Re: Social Security overpayment, Federal withholdings, and the child tax credit
« Reply #1 on: September 11, 2018, 02:24:32 PM »
You would get the excess SS tax withholding back on line 71 of Form 1040.  (Although they're revamping the Form 1040 and moving a lot of stuff off the main form and onto schedules, so it'll probably be in a different location.)

Still, excess SS tax withholding is treated as a payment just like your regular withholding, so if you wanted to adjust your regular withholding down to account for it, you certainly could.

I personally like and have used www.paycheckcity.com in the past, and it looks like it's still a good place to go.  Basically all you need to do is figure out what 7.65% of your paycheck is and tweak the withholding until you get to that number.

If you want to count on your second child being born this year, that baby would generally qualify you for a second $2,000 child tax credit.  To adjust your withholding for that, just divide $2,000 by the number of paychecks remaining this year, and tweak your withholding lower by that amount.

Finally, you'll need to remember to adjust your withholding higher again in approximately January 2019 by the 7.65% SS adjustment you're making, because that will be a one time thing and you don't want to be under-withheld for 2019.

HTH.

protostache

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Re: Social Security overpayment, Federal withholdings, and the child tax credit
« Reply #2 on: September 11, 2018, 07:42:04 PM »
Thanks! I ended up iterating on Paycheck City's calculator and TaxACT's 2018 forecast to get to a decent number ($700 refund with kid, $1300 owed without) and got to 30 (!!) allowances (also accounting for some some supplemental income that's being withheld at a non-negotiable 22%). Unfortunately the PEO's payroll software only allows me to pick 20 allowances, so that's what I did.

secondcor521

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Re: Social Security overpayment, Federal withholdings, and the child tax credit
« Reply #3 on: September 12, 2018, 12:49:52 AM »
Thanks! I ended up iterating on Paycheck City's calculator and TaxACT's 2018 forecast to get to a decent number ($700 refund with kid, $1300 owed without) and got to 30 (!!) allowances (also accounting for some some supplemental income that's being withheld at a non-negotiable 22%). Unfortunately the PEO's payroll software only allows me to pick 20 allowances, so that's what I did.

Yup.  You may just have to get a refund.

If you want to, you can submit a paper W-4 and I believe the company is required to accept it and put in whatever allowance number you write in.  But you may catch some grief if you try to make them take it (they may not want to deal with the hassle and may not know how to).

protostache

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Re: Social Security overpayment, Federal withholdings, and the child tax credit
« Reply #4 on: September 13, 2018, 10:05:37 AM »
Update: I sent in a support request and they had me do a "paper" W4, where I just filled in the PDF and emailed it back to them. Just got the confirmation the change went through this morning. Hooray!

secondcor521

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Re: Social Security overpayment, Federal withholdings, and the child tax credit
« Reply #5 on: September 13, 2018, 10:54:03 AM »
Thanks for the update, and glad everything went well!