As discussed previously. the United States government utilizes a withholding system to maximize its tax collection efforts. Under the system, most employers 1 are required to withhold a particular percentage of employee earnings to sufficiently fund its Social Security program.
Social Security withholding, for the most part, occurs at such a rate that an appropriate amount of income is withheld from each employee’s paychecks. High earning taxpayers, however, may be entitled to a tax credit when employers withhold too large of Social Security amounts. Line 69 of Form 1040 permits taxpayers (and/or their spouse if filing a joint return) with (1) more than one employer in 2012 and (2) total wages exceeding $110,100 to claim a
credit for superfluous Social Security and/or Tier 1 railroad retirement (RRTA) withholdings 2. Eligible taxpayers can take this credit for any amount withheld in excess of $4,624.
NOTE. If any one employer withheld more than $4,624, a taxpayer cannot claim this credit. Instead, the over-collecting employer should personally adjust the error. If the employer fails to do so, the taxpayer may file a claim for refund using Form 843 .
1 In some cases, the federal government and state and local governments do not have to withhold social security tax from their employees’ wages.
2 Taxpayers cannot claim a refund for excess Tier 2 RRTA tax on Form 1040. Instead, use Form 843 .