1.16 IRS Procedures: W–4 - Allowances, Excess FICA, Students, Withholding
If you have more than one employer and your wages were over the annual social security wage limit of $9,200.00 for 2006, you probably had too much social security tax withheld. (There is no wage limit for Medicare tax.)
You can take a credit for the excess withheld in the "Payments" section of Form 1040 or Form 1040A. Since it is credited in the payment section, it is a refundable credit and is applied like a payment. It will either be applied against any tax owed or refunded to you. The maximum social security tax for the tax year can be found in the Form 1040 Instructions in the "Payments" section under "Excess Social Security and Tier 1 RRTA Tax Withheld," or Tax Topic 608, Excess Social Security and RRTA Tax Withheld, or in Publication 505, Tax Withholding and Estimated Tax .
References:
- Publication 505, Tax Withholding and Estimated Tax
- Tax Topic 608, Excess social security and RRTA tax withheld
- Form 1040 (General Inst.) Instructions
Yes, if your part-time job is with a different employer. Each employer is responsible for withholding on wages subject to social security up to the annual wage limit which is $94,200.00 for the 2006 tax year. They are not responsible for determining any amount withheld by another employer. Consequently, with two or more employers, too much social security will be withheld if your total wages exceed the annual wage limit. (The wage limit is adjusted annually for inflation.) That is the reason there is a credit for excess social security and Tier 1RRTA tax withheld. It is in the "Payments" section of Form 1040 and Form 1040A so that if it is not needed to apply against tax owed, it is refunded to you.
The Medicare tax has no annual wage limit.
References:
- Publication 15, Circular E, Employer's Tax Guide
- Tax Topic 608, Excess social security and RRTA tax withheld
Generally, employee wages are subject to social security and Medicare taxes regardless of the employee's age or whether he or she is receiving social security benefits.
References:
- Publication 15, Circular E, Employer's Tax Guide
No, social security tax is paid up to the annual wage base limit regardless of whether your income is derived from self employment income, wages and tips, or a combination of both. For 2006, this dollar amount is $94,200. When computing Form 1040, Schedule SE (PDF) , Self-Employment Tax , the annual wage base amount is addressed to prevent over payment of the social security tax.
References:
- Form 1040, Schedule SE (PDF), Self-Employment Tax
All wages paid are subject to Medicare tax, so there can be no overpayment of Medicare tax. However, if you worked for two or more employers and your total wages are over, the wage base limit for the year, too much social security or Tier 1 RRT tax may have been withheld. If you had had too much social security or Tier 1 RRA tax withheld, you may be able to claim the excess as a credit against your income tax. The credit for excess social security withheld is claimed on line 67 of the Form 1040. If you file Form 1040A, include the credit in the total of line 43 and put "Excess SST" and the amount of the credit in the space to the left of the line. If you are filing a joint return, you figure the credit separately for you and your spouse. .
References:
- Publication 17, Your Federal Income Tax
Credit for excess social security tax withheld is claimed on Form 1040, or Form 1040A. See Tax Topic 608, Excess Social Security and RRTA Tax Withheld. However, if any one employer withheld more $5,580, you cannot claim the excess on your return. The employer should adjust the tax for you. If the employer does not adjust the over collection, you can file a claim for refund using Form 843 Claim for Refund and Request for Abatement . See Form 1040 (General Inst.) Instructions on Excess Social Security Tax and the Tier 1 Railroad Retirement Tax Withheld.
References:
- Publication 17, Your Federal Income Tax
- Tax Topic 608 Excess Social Security and RRTA Tax Withheld,
You can claim the number of withholding allowances that you are entitled to based on the Form W-4, Employee's Withholding Allowance Certificate, worksheets. You can claim less than you are entitled, but not more. You may not arbitrarily pick a number with the goal of avoiding income tax withholding. The law provides for a civil penalty of $500 for filing a false statement on Form W-4.
If at the time the Form W-4 is submitted, the employee has made any statement indicating that the Form W-4 is false in any way, it is invalid. If an employer receives an invalid Form W-4, the employer will inform the employee that the Form W-4 is invalid and request a new Form W-4. If the employee fails to give the employer a new Form W-4, generally, the employer would then be required to withhold as if the employee were single claiming no withholding allowances. However, if a prior Form W-4 was in effect, the employer would continue to withhold tax based on the prior Form W-4.
If directed to do so in a written notice from the IRS or IRS published guidance, employers must submit copies of one or more employee's Form W-4. to the IRS.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Publication 15, Circular E, Employer's Tax Guide
- Form W-4, Employee's Withholding Allowance Certificate
- Tax Topic 753, Form W-4 employee's withholding allowance certificate
- Welcome to the IRS Withholding Calculator
You may claim fewer allowances than you are entitled to claim, but you may not claim more than you are entitled to claim. If you only complete the Personal Allowances Worksheet on the front of Form W-4, Employee's Withholding Allowance Certificate, you may not have accurately determined the number of allowances you are entitled to claim. There are more worksheets (the Deductions and Adjustments Worksheet and the Two-Earner/Two Job Worksheet) on the back of Form W-4. Complete all applicable worksheets to determine the number of allowances you can claim.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Publication 213 (PDF), Check Your Withholding
- Form W-4, Employee's Withholding Allowance Certificate
- Publication 919, How do I Adjust my Withholding
- Welcome to the Withholding Calculator
The number of exemptions on your tax return may differ from the number of allowances on your Form W-4. An exemption is allowed on your tax return for yourself, your spouse (if married filing jointly), and qualifying dependents (if you are an U.S. citizen or resident alien). Each exemption merits a withholding allowance on the Personal Allowances Worksheet on your Form W-4, Employee's Withholding Allowance Certificate.
However, there are two more worksheets that my affect the final number of allowances, and under some circumstances, you get more allowances than you have exemptions. Some things that will be on your tax return, such as itemized deductions, tax credits, and losses, add allowances to the total number of allowances. Some circumstances reduce the number of allowances, such as non-wage income, having two jobs, or having two earners in the family. For a more detailed discussion of withholding allowances, refer to Publication 505, Tax Withholding and Estimated Tax.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Publication 213 (PDF), Check Your Withholding
- Form W-4, Employee's Withholding Allowance Certificate
What you put on your Form W-4, Employee's Withholding Allowance Certificate, are withholding allowances, not exemptions. An exemption is allowed on your tax return for yourself, your spouse (if married filing jointly), and qualifying dependents (if you are an U.S. citizen or resident alien). Each exemption merits a withholding allowance on the Form W-4 Personal Allowance Worksheet.
However, there are two more worksheets that may affect the final number of allowances, and under some circumstances, you get more allowances than you have exemptions. Some things that will be on your tax return, such as itemized deductions, tax credits, and losses add allowances to the total number of allowances. Some circumstances reduce the number of allowances, such as non-wage income, having two jobs, or having two earners in the family. For a more detailed discussion of withholding allowances, refer to Publication 505, Tax Withholding and Estimated Tax.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Publication 213 (PDF), Check Your Withholding
- Form W-4, Employee's Withholding Allowance Certificate
Every U.S. citizen or resident must file a U.S. income tax return if certain income levels are reached. There is no exemption from tax for full-time students. Factors that determine whether you have an income tax filing requirement include:
- The amount of your income (earned and unearned),
- Whether you are able to be claimed as a dependent,
- Your filing status, and
- Your age.
You may have given your employer a Form W-4, Employee's Withholding Allowance Certificate, claiming exemption from withholding. To claim exemption from withholding, you generally would have to have had no tax liability the previous year and expect none in the current year. An exemption certificate is good for the calendar year.
For related topics see Tax Information for Students .
References:
- Publication 17, Your Federal Income Tax
- Publication 505, Tax Withholding and Estimated Tax
- Form W-4, Employee's Withholding Allowance Certificate
- Tax Information for Students.
You are not automatically exempt from federal income tax withholding because you are a full-time student. To claim exemption from withholding, you generally would have to have had no tax liability the previous year and expect none in the current year. An exemption certificate is good for the calendar year.
*You may use the IRS withholding calculator to determine if you will have a tax liability for the current year.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Welcome to the IRS Withholding Calculator
Generally, if an employer does not withhold income taxes, social security, and Medicare from your pay, you are being treated as an independent contractor (self-employed person). If you believe an employee relationship exists and you cannot resolve this matter with your employer, you should submit a Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The factors used to determine if an employer-employee relationship exists are covered in Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide.
If your status as an employee is not at issue, it may be that you are in a category of employment whose earnings are not defined as wages under U.S. federal tax and social security law. Find out from your employer the reason that social security and Medicare taxes and income taxes are not being withheld from your pay. If you have further questions, contact the IRS at 800-829-1040 or visit an IRS walk-in office for assistance.
References:
- Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding
- Publication 15-A (PDF), Employer's Supplemental Tax Guide
- Publication 1779 (PDF), Independent Contractor or Employee
Yes, an employer can. Employers should ask all employees to submit a signed Form W-4, Employee's Withholding Allowance Certificate, when they start work. It should be effective the first pay period. If the employee does not submit a Form W-4, the employer should withhold as if the employee were single claiming no allowances.
An employee may submit a Form W-4 at any time. The employer should base the employee's income tax withholding on the most recently submitted Form W-4, unless the IRS has notified the employer to withhold based on a different number of allowances, or unless the Form W-4 is invalid. If an employee submits a new valid Form W-4, the employer should start withholding based on that Form W-4 no later than the start of the first payroll period ending on or after the 30th day from the day the new Form W-4 is submitted.
References:
- Publication 505, Tax Withholding and Estimated Tax
- Publication 15, Circular E, Employer's Tax Guide
- Form W-4, Employee's Withholding Allowance Certificate
- Tax Topic 753, Form W-4 employee's withholding allowance certificate
Students who perform services for the school, college, or university where they are enrolled and regularly attend classes are usually not subject to social security and Medicare taxes.
If the student works for a public school, college or university which is subject to a section 218 agreement, the student's services are automatically subject to social security and Medicare taxes if the state has chosen to cover students under its section 218 agreement with the Social Security Administration. The employer can tell you whether its students' services are subject to social security and Medicare taxes under a section 218 agreement.
References:
- Publication 15, Circular E, Employer's Tax Guide
- Federal Regulation section 31.3121(b)(10)
If you are not performing a service for the university, your stipend would be subject to income tax only if it does not meet the qualified scholarship rules. Please refer to Publication 970 Tax Benefits for Education, for information on when a stipend would be a qualified scholarship, which would not be subject to income tax or social security and Medicare taxes. If you are performing a service for the university, your income is taxable for income tax purposes, but would generally be exempt from social security and Medicare taxes if you are enrolled and regularly attending classes unless you are covered under a section 218 agreement. Refer to Publication 15, Employer's Tax Guide.
If your employer has been incorrectly withholding social security and Medicare taxes from your stipend, the employer should refund the withheld tax. If the employer refuses to do so, Form 843, Claim For Refund and Request For Abatement, can be filed to claim credit for the incorrectly withheld tax.
References:
- Publication 970, Tax Benefits for Education
- Publication 15, Employer's Tax Guide
- Form 843, Claim For Refund and Request For Abatement
The entire amount of a minister's housing allowance is subject to social security and Medicare taxes, even though it may be excluded from taxable income for income taxes. The compensation (including a housing allowance) that a church pays to its duly ordained, commissioned, or licensed minister for performing services as a employee in the exercise of ministry is subject to Self-Employment Contributions Act (SECA) taxes, not the Federal Insurance Contributions Act (FICA) taxes. Under SECA the self-employed person pays all the taxes while under FICA the employer and employee each pay half of the taxes.
However, if you are a duly ordained Commissioned, or licensed minister, or member of a religious order not under a vow of poverty, or a Christian Science Practitioner and you elected and were approved for exemption from Social Security coverage and self-employment tax, your compensation (including your housing allowance) would not be subject to social security or Medicare taxes under SECA.
References:
- Publication 517, Social Security and Other Information for the Members of the Clergy and Religious Workers
- Form 4361 (PDF), Application for Exemption from Self-Employment Tax for Use by Ministers, Members of Religious Orders
- Tax Topic 417, Earnings for clergy