So I’m finishing up my 2024 tax return (I always pay, so I always file at the last minute) and, since I had two employers last year, I had too much Social Security tax withheld. I can claim credit for the excess withholding against my tax bill, so all good from my end.
However, since employers also pay an equivalent amount in Social Security taxes to what they withhold from my paycheck, do they also get a credit for excess withholding? If so, how do they even find out that they are eligible? How do they determine which employer gets the credit?
Yearly income limit on SS withholding is (2025) 176,100 @ 6.2%. Say you get paid 100,000 from each job. You get 200,000 with SS withholding on the extra 23,900 being refundable. However, each employer paid their required amount on only 100,000 each.
The limit is per employer, for the employer portion of the SS tax. Unless you exceed the wage limit at one of the employers, they will be both be on the hook for the employer portion of FICA for your full wage amount.
@hajario has interpreted th OP correctly. Looking for a factual answer regarding if and how the employers get credit for excess payment.
Employer A and Employer B in the example do not necessarily know each other’s identities.
Employer A does not know what I made at Employer B and what SS was paid by Employer B.
The reverse is true as well.
AFAIK the only entities that know of the excess payment are the IRS and the SSA.
It can get more complicated than serial employment. For example, if I had a vested non-statutary stock option grant from Employer A that I did not exercise until I was with Employer B for several years, the earnings from that exercise are treated as ordinary income in the year of exercise - Employer A withholds taxes like it is a paycheck, including SS tax. Presumably they also pay the employer portion of the SS tax. I get a W-2 from Employer A reflecting the earnings from the stock option. In that tax year I am likely reclaiming a large amount of excess SS contributions.
If I look at my lifetime earnings on the SSA website I see that the employer lifetime contributions to SS are substantially (like 25-25%) higher than my contributions. Which means that over my lifetime my employers paid 20% more to the SSA than I did. From this I infer that my employers do not get their excess contributions back.
As I understand it, both companies owe FICA on the full $150k. Only the employee gets the credit back when they file their taxes.
Correct. Or, more accurately, there are no excess contributions on the employer portion of FICA unless the income from that employer to that employee exceeds the wage limit.