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Most employers must withhold Social Security
tax from your wages. This 6.2 percent employer-collected tax, noted
as FICA
on most pay stubs, is credited to your
account at the Social Security Administration, along with your employer's
matching contributions at the same rate.
These payments determine your benefits
when you retire. While there is a limit on how much
can be contributed each year, taxpayers sometimes unintentionally
overpay this tax. In these cases, you can get your Social
Security tax money back as a credit on your individual
tax return.
Social
Security earnings base
In 2006, Social Security was collected on your earnings
up to $94,200.
If you earned this much at one job last
year, you put in almost $5,840.40 that was matched by your
boss. In this situation, the math is straightforward.
Once your pay went over the limit, your payroll manager
stopped withholding the tax and your take-home pay got
a bit bigger.
But if you changed jobs and your combined
income from both employers went over the limit, you
probably overpaid your Social Security taxes. This is
because the second company also withheld the tax, unaware
of how much a previous employer had already collected.
Recovering
overpayments at filing time
You can get back the excess Social Security that was
withheld when you file.
If you file Form 1040, line 67 of the
form is where you'll get credit for your overpayments.
Simply add the amounts of Social Security withholding
reported by each employer on your W-2s and subtract
$5,840.40. The result goes on this line, to be included
in your total tax payments.
You also can claim the overpayment if
you file the shorter 1040A. While it's not specifically
noted on the return, the form's instructions (page 53)
tell taxpayers to enter their Social Security tax overpayments
on line 43.
Married couples filing a joint return
must compute any excess Social Sescurity withholding
separately.
And if you had only one employer but still
had too much Social Security tax withheld, you can't
claim the excess on your return. Instead, you must ask
your company to refund the surplus to you.
Refund
not guaranteed
Remember, however, that claiming credit for overpaid
Social Security taxes on your return doesn't guarantee
you'll get a check from the IRS for that amount.
Your excess retirement tax is considered
by the IRS as part of all the taxes you've already paid.
This total tax amount also includes income tax withheld,
any estimated
taxes you sent in yourself and some tax credits.
All of these payments are detailed on lines 64 through
71 on this year's Form 1040 and then are subtracted
from the tax bill you figured on line 63.
On 1040A, these tax payments are detailed
on lines 38 through 43 and subtracted from your tax
due shown on line 37.
What all these line entries, computations
and subtractions mean is that if you owe Uncle Sam $15,000
and made tax payments, including any overpaid
Social Security taxes, of $13,000, you'll still owe the IRS $2,000.
Your overpayment of Social Security tax is used to help
cover your underpayment in another area.
For more information, including worksheets
to help you compute the amount of an excess Social Security
credit, check out IRS
Publication 505, Tax Withholding and Estimated Tax.
And for your 2007 tax-tracking purposes,
Uncle Sam is going to collect FICA on a bit more of
your earnings. He still will take 6.2 percent of your
income, but he'll be able to do so on up to $97,500,
meaning you could pay a maximum of $6,045 to Social
Security this year.
Freelance writer Kay
Bell writes Bankrate's tax stories from her home in
Austin,
Texas, and blogs on tax topics at Don't
Mess with Taxes.
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