Remember when you got your first paycheck and wondered why it was so small? All 16-year-olds hate FICA. 🙂
Even though it’s not included when we talk about marginal tax rates, all employees have to pay 6.2% of their gross income to Social Security and 1.45% for Medicare. (Double that for self-employed folks.) However, there is a limit for Social Security – the tax only applies to the first $97,500 of wages for 2007 ($6,045), no matter how many different sources it came from. The problem is, your employers have no idea what you’re making at your other jobs, or when you reach that cap.
I came across this WSJ article which tells you how to get any overpaid amount refunded back to you at filing time. Keep in mind it’s using cap values for 2006.
If you worked for two or more employers and had too much withheld, you can claim the excess as a credit.
Here’s a hypothetical example supplied by the IRS: Suppose you’re married and file jointly. Your spouse didn’t have any income last year. You worked for a company that paid you $58,000 during 2006 and withheld $3,596 (6.2% of $58,000) in Social Security tax. You also worked for another employer who paid you $47,000 and withheld $2,914 of Social Security tax (6.2% of $47,000).
Thus, the Social Security tax withheld totaled $6,510. That’s $669.60 more than you actually owe ($6,510 minus $5,840.40). So you’re entitled to a credit of $669.60. Enter it on Form 1040, line 67, or on Form 1040A, line 43.
I would assume that TurboTax or similar would catch this, but it’s definitely worth double-checking.
I was also trying to find online if you could direct your employer to stop withholding Social Security taxes if you “know” you’re over the limit already, but it seems like you can’t. They just keep withholding as if that was your only job. But what you can do is change your total tax withholding values (increase exemptions, etc.) in order to counteract this overpayment and reduce your future refund.