Excess Withholding for Social Security Tax

[Brilliantine]

I changed jobs this year to a higher paying job. Between the relocation assistance I received and the salary bump, cumulatively, I believe I have exceeded the wage limit for Social Security withholding but my new employer has no idea and continues to withhold.

(Even if they did know, I doubt they would be able to not withhold, but that's not the question.)

So, what happens to this money, come tax time? Is the IRS smart enough to say "Oh, I see what happened here. We will credit that extra amount to your income tax."? If yes, do I get a (full) refund?

Part two. Some preliminary googling indicates there might be a form to file. Does Turbo Tax know how to handle this? Does it automagically generate the form?

[Wile E. Coyote]

Yes, this is all very easy to do and TurboTax can handle it.  The excess social security withholding will be treated the same as any other overpayment and will be refunded.  You could reduce your withholding for the rest of 2015 to account for this.

[johnny847]

I changed jobs this year to a higher paying job. Between the relocation assistance I received and the salary bump, cumulatively, I believe I have exceeded the wage limit for Social Security withholding but my new employer has no idea and continues to withhold.

(Even if they did know, I doubt they would be able to not withhold, but that's not the question.)

So, what happens to this money, come tax time? Is the IRS smart enough to say "Oh, I see what happened here. We will credit that extra amount to your income tax."? If yes, do I get a (full) refund?

Part two. Some preliminary googling indicates there might be a form to file. Does Turbo Tax know how to handle this? Does it automagically generate the form?

Legally your employer must continue to withhold FICA despite you going over the SS tax max.

You can claim excess withholding on line 71 (2014 form) of your 1040. You will get a full refund of this money.

You may wish to increase the allowances claimed on your W4 to make up for the excess SS tax withholding.

[Brilliantine]

Thanks for the quick responses, guys!

Hmm, now I am a little embarrassed. I should get more familiar with the 1040.

[Brilliantine]

Just to be clear, submitting a new W-4 does nothing to my SS withholding; it will continue to be the same amount, provided my FICA-exempt deductions don't change, right?

The increased number of allowances will reduce my federal withholding so that I will owe income tax which will be, in part, paid for with the excess FICA withholding?

[Cathy]

...You could reduce your withholding for the rest of 2015 to account for this.

You may wish to increase the allowances claimed on your W4 to make up for the excess SS tax withholding.

Prior to 1987, the employer would not have been required to honour a request to adjust an employee's withholdings for the remainder of the calendar year, if such request was made in November. The law on this point was changed by § 10302 of the Omnibus Budget Reconciliation Act of 1987, PL 100-203, 101 Stat 1330-429 (December 22, 1987). The heading of § 10302 reads "Revised Withholding Certificates Required to be Put into Effect More Promptly", which is an accurate description of the provision.

The interesting part of this is that the Secretary of the Treasury has never updated the regulations on this topic to reflect the "new" rule introduced in 1987. The regulations still prescribe the pre-1987 rule, under which changes in withholdings only needed to be updated quarterly. 26 CFR 31.3402(f)(3)-1. Of course, since this regulation is inconsistent with the statute, the regulation is "a mere nullity", lacking any legal force. Manhattan General Equipment v. Commissioner, 297 US 129, 134 (1936).

[johnny847]

Just to be clear, submitting a new W-4 does nothing to my SS withholding; it will continue to be the same amount, provided my FICA-exempt deductions don't change, right?

The increased number of allowances will reduce my federal withholding so that I will owe income tax which will be, in part, paid for with the excess FICA withholding?

Correct on both counts.

Line 71 is in the section of payments, which is the same section as tax withheld by your employer (Line 64, Federal tax withheld from Forms W-2 and 1099).
Any payment is refundable if your payments exceed your liability.

(Side note, this is one way you can tell whether a tax credit is refundable or not: if it is in the payment section, it is refundable. If it is in the tax and credits section, it is non-refundable. Some tax credits have both a refundable and non refundable portion).