Don’t Overpay Social Security Taxes
Did you or someone in your family switch jobs or moonlight during 2010? Before filing your Form 1040, it’s a good idea to recheck the totals shown on the W-2 forms for the salaries you received and the taxes that you already paid through withholding for federal, say and city income taxes and for Social Security taxes. In particular, see whether the total exceeds $6,621.60 for the amounts withheld by your employers for Social Security taxes.
For 2010, the rate for Social Security taxes is 6.2 percent, and that rate applies to wages up to $106,800. Therefore, you don’t have to pay more than $6,621.60. (There’s no limit on the amount of wages subject to the rate of 1.45 percent for Medicare taxes). If you worked for two or more employers and they took out more than $6,621.60, claim the amount in excess of $6,621.60 as a payment of income tax on line 69 of Form 1040, just the same as withholding for income taxes on line 61. Doing so will reduce the amount you owe or increase your refund.
Don’t add Social Security withheld from your spouse’s wages to the amount withheld from your wages. Any excess withholding should be figured separately for yourself and your spouse. If a single employer mistakenly withheld more than $6,621.60 for Social Security, straighten the matter out with the employer. You can’t claim the excess as a payment of income tax on line 69.
There are special rules for self-employment taxes. For 2010, the Social Security tax of 12.4 percent applies to net self-employment earnings (receipts minus earnings) up to $106,800. The no-ceiling Medicare tax is 2.9 percent for self-employeds.
But the law also authorizes a break when you have more than one self-employed operation. It grants you to combine the earnings from all of them. Consequently, the losses from one or more businesses offset the earnings from those that are profitable.
You’re relieved of any obligation for the self-employment tax (Social Security part of 12.4 percent) if you paid the full Social Security tax of $6,621.60 through withholding on wages. Stated differently, forget about the 12.4 percent part if you worked for someone else and received salary or wages of $106,800 or more on which your employer withheld Social Security.
To help ease the hurt, remember to claim a deduction for one-half of the self-employment tax on line 27. The IRS characterizes this kind of write-off as an “above-the-line” adjustment, meaning it gets subtracted from gross income to arrive at adjusted gross income (line 37), just the same as alimony payments and contributions to traditional IRAs and other retirement plans. Thus, the write-off is available, whether you claim the standard deduction (line 39), the no-questions-asked amount that’s automatically available without the need to itemize, or itemize (line 40) deductions for say income taxes, donations to charities and the like.
More source:
Don't Overpay on Social Security Taxes - WSJ.comRecovering Social Security tax and FICA overpayments - Yahoo ...
Realty Times - Don't Overpay Social Security Taxes
Don't Overpay Your 2012 Federal Taxes, You Might Find the Refund ...
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Submited at Monday, April 11th, 2011 at 3:00 pm on News by madison
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