Can Someone Explain the FICA Tax Overpayment?

Monitor your earnings to make sure FICA deductions stop when they should.
i Comstock/Comstock/Getty Images

When Congress passed the Federal Insurance Contributions Act, the goal was to provide supplemental income to retirees, payments for the disabled and income for survivors of deceased workers. You are probably more familiar with the name Social Security. This program gets its funding through contributions made by you and your employer. At times, too much can be withheld from your earnings to cover your part of FICA.


Social Security taxes cannot exceed a certain amount each year, and the limits are based on your gross income. As of 2012, the limit is $110,100. This means you and your employer pay FICA on your first $110,100 earned. Once your wages exceed this amount, neither of you should pay additional Social Security taxes for the rest of the year.

Mistakes Happen

If you work for only one employer all year, you usually will not have too much Social Security tax withheld unless the payroll clerk is asleep at the wheel. However, if you change jobs in the middle of the year or work two jobs, there may be problems. Suppose you work for Company A from January to June and earn $60,000. You jump ship and work for Company B from July to December, earning $75,000. Your total earnings for the year are $135,000, which exceeds the annual limit. Unfortunately, since your earnings never exceeded $110,100 with either employer, each company must withhold FICA on all of the earnings it paid you.

What to Do

If too much FICA is withheld, you may think you are just out of luck. However, if the excess deduction is because of an error by your employer, your employer can reimburse you for the difference. Notify your employer as soon as you realize the error has been made. If he does not refund your money, use IRS Form 843 to file a claim to recover your overpayment.

Multiple Employers

Things get more complicated if the overpayment resulted from having more than one employer during a tax year. Your employers can't give you back your money because, legally, they are required to collect it. The only way to recover the overpayment is to claim a credit when you file your income tax return. Add up all of the FICA withheld from your paychecks; do not include Medicare. Determine the maximum that should have been withheld by multiplying the applicable limit by the percentage in effect for the tax year.

For example, in 2011, the limit was $106,800 and the employee's percentage was 4.2 percent. The most you should have paid for FICA was $4,485.60. Subtract the maximum you should have paid from the total withheld. This is your excess FICA payment. Enter this amount on line 69 of your Form 1040. This will reduce the amount of income tax you must pay or increase the amount of your refund.

the nest