With the economy in a deep slump during part of last year, many people may have worked for two or more employers. If that includes you, watch out for a classic tax blunder that can cost you money.
You may have had too much in Social Security taxes withheld from your paychecks from all your employers for last year. If so, you can claim the excess as a credit against your income tax.
Social Security’s “Old Age, Survivors and Disability Insurance” program, or OASDI, includes a limit on how much of your earnings are subject to tax each year. For 2009, that amount, known as the Social Security “wage base,” was $106,800, up from $102,000 the previous year, according to the Social Security Administration (www.ssa.gov). The increase reflected changes in a national average wage index.
The Internal Revenue Service says the maximum amount all your employers should have withheld for 2009 was $6,621.60 — which is 6.2% of $106,800. If more than that amount was withheld, you can get a credit for the excess amount on your federal income-tax return. If you have already filed your return for 2009, you can file an “amended” return on Form 1040X.
The IRS offers this example: Suppose you are married and file a joint return with your spouse, who didn’t have any gross income last year. During 2009, you worked for a company that paid you $60,000 in wages. That employer withheld $3,720 for Social Security tax (6.2% of $60,000).
You also worked for another employer and earned $55,000. That employer withheld $3,410 in Social Security tax.
Thus, the total amount that was withheld by all your employers was $7,130, or $508.40 more than the proper amount. “Because you worked for more than one employer and your total wages were more than $106,800, you can take a credit of $508.40 for the excess Social Security tax withheld,” the IRS says in Publication 17, available at www.irs.gov.
For 2010, the Social Security wage base remains unchanged at $106,800. However, all your wages remain subject to Medicare tax withholding.
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