CARL WATTS & ASSOCIATES

February 09, 2015

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Social Security & RRTA
Tax Withholding
As we are all aware, the United States government utilizes a withholding system to maximize its tax collection efforts. Under the system, most employers are required to withhold a particular percentage of employee earnings to sufficiently fund its Social Security program.

Certain government employers (some federal, state and local governments) do not have to withhold Social Security tax.

If you work for a railroad employer, your employer must withhold Tier 1 Railroad Retirement Tax Act (RRTA) tax and Tier 2 RRTA tax. Tier 1 RRTA provides equivalent Social Security and Medicare benefits, and Tier 2 RRTA provides a private pension benefit.

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.

The Social Security tax has a wage base limit. The wage base limit is the maximum wage that is subject to the tax for that year. The 2014 Social Security wage base was $117,000. For earnings in 2015, this base is $118,500.

Some taxes can be adjusted to change the withholding, but the Social Security maximum withholding is a set percentage.

The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total.

If you are self-employed, than you have to pay self-employment tax, which consists of both Social Security and Medicare taxes.

It is important to keep track of the amount being taken out to avoid errors. If too much Social Security tax is taken out, that taxpayer is entitled to a refund.

One of the most common reasons that an employee has too much Social Security taxes withheld is that they had multiple jobs. It is possible that the combined tax taken out is more than the required amount.


Another case might be if there are two different W2s from the same employer, and the amount is not correct when they are combined.

Other times, it could be an error when filing, and is simply a matter of putting the numbers with the wrong wage earner, but there really was not too much tax withheld. The other most common reason is simply a clerical error on the part of the employer when filling out the forms.

The best way to ensure that an employer is not withholding too much Social Security tax is to check the paycheck regularly. Make sure that the appropriate percentage is being taken out of the check. If there is an error, report it so that the payroll department can adjust the withholding.

The other time to check is when the W2s are received from all employers. If the amount does not look right, approach the payroll department or the employer to have everything adjusted for the next year.

Nowadays, almost everybody uses a tax preparation software, so if you haven’t noticed the excess of SS tax withheld, the software automatically calculates the amount and should notify if you have excess payments.

If you had too much Social Security tax or Tier 1 RRTA withheld, you may be able to claim the excess as a credit against your income tax on your income tax return.


If you file Form 1040, enter the excess on line 69.

If you file Form 1040A, include the excess in the total on line 41. Write “Excess SST” and show the amount of the credit in the space to the left of the line.

You cannot claim excess social security tax withholding on Form 1040EZ.

You cannot claim a refund for excess Tier 2 RRTA tax on Form 1040. Instead, use Form 843, Claim for Refund and Request for Abatement. Attach copies of your Forms W-2, Wage and Tax Statement, for the year to Form 843.

If you are filing a joint return, you and your spouse must figure any excess Social Security tax or Tier 1 RRTA tax separately.

If any one employer withheld too much Social Security or RRTA tax, you cannot claim the excess as a credit against your income tax. Your employer should make an adjustment of the excess for you. If the employer does not make an adjustment, you can use Form 843 to claim a refund.

Dealing with taxes and the IRS can be complicated and time-consuming, so, as always, we urge you to enroll help from a tax professional to make sure that you pay the right amount of taxes and take advantage of all credits and deductions you are entitled to.


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