Excess Social Security Withheld - One Employer

[GodFather]

Employer was sold mid year.  Buying company took over payroll and began withholdings from zero.  Ultimately, my client received two W2's from the same company.  W2 #1 had already had maximum SS withholdings.  W2 #2 showed additional SS withholdings.  Company would not reimburse employee due to the "sale".  

Wondering if anyone has used IRS Form 843 to claim a refund?  It looks fairly straightforward and I will add copies of both W2's and show the calculations for the requested refund of the excess SS withheld.

I did read up on the topic:

  Instructions for Form 843 (12/2021) | Internal Revenue Service (irs.gov)

[IRonMaN]

Did the new owners actually buy the stock or did they buy assets and the name?  If they bought the assets, the W-2s were prepared correctly.

[abctax55]

Are there two different FEIN's on the W-2's

[GodFather]

Clients are unsure Ironman.  But thanks for the info.  

[GodFather]

Will verify this.  Thank you. 

[garman22]

Unless I am missing something, when you file the return the excess SS withheld will show up as additional withholdings and there is your refund or lowering of any balance due. 

[rcooley25]

Just enter both w2's normally.

If as you say there is an overpayment of social security it will automatically show on the tax return as additional money withheld for income taxes. End of problem.

I would question the mentality of the new owners accountants having them start a new company rather than just buying the corporate stock in the previous corporation ( If we are talking corporations ) because that new company had to match the social security withheld which they would not have to do if the corporation was just operating under the old corporate charter. And then there is federal and state unemployment tax that they had to pay when the previous company had already reached the limit. And that is why they pay these people the big bucks? 

[abctax55]

@rcooley25 

When one buys the stock of a corporation, one is also buying all the liabilities.  Known and *UNKNOWN* liabilities.  And it's the unknown ones that can be problematic. 

There's a lot more going on with buying the stock than just payroll issues.

[rcooley25]

You are not missing anything.

[rcooley25]

Depending on the number of employees we are talking about a huge amount of payroll expenses that the new owners should not have had to pay.

[GodFather]

Just as a follow-up to my original post.  This is a 2021 return.   I did check the W2's.  There are two of them and the Employer information is identical.  Same name, address and EIN. 

SS Wages on 1: 92,026  w/h 5,705  

SS Wages on 2: 142,800  w/h 8,854

There is no calculation of excess SS showing up as additional withholdings.  I assume that is due to the identical W2's and the need to file form 843.

Appreciate everyone chiming in. 

[IRonMaN]

Should it have been the same EIN for both?

[rbynaker]

Ugh.  Good luck.  Either way the employer (or at least AN employer) screwed something up.  If it was a stock sale they should have continued with the YTD SS wages.  If it was an asset sale they should have reported the second W2 under a different EIN.

Looks like F843 wants an employer statement attached.  Good luck getting that (but I think you have to try!)  Maybe you (or client) can escalate far enough up the chain of command to reach someone smart enough to realize that they likely paid way too much in employER SS tax too and the clock is ticking to amend those payroll returns.  It's really in their best interest to fix it on their end without involving the IRS.

[GodFather]

rbynaker...thanks very much for your thoughts.  It's not everyday you come across this.  I certainly intend to have the client reach out.  I'm not optimistic the employer will do anything but all I can do is provide guidance to them.  Hoping for the best.  Thanks again.  

[qbteachmt]

"It's not everyday you come across this."

Ugh, it's more common than you want to know, and you should check if there is any similar carryover mistake for retirement, HSA, too. Anything wage or annually limited, in other words.

You might not see this very often, because someone like me goes in there and straightens it out before year end, if you're lucky. Or the new staff shows up in my payroll class and all is revealed as we learn.

[rkohara01]

I had the same issue and filed the 843, which was rejected by the IRS as the inappropriate method to claim the excess SS.  BTW, I filed an amended return before I was aware of the 843 and that didn't work, obviously.

We appealed to TAS to resolve this issue.  The TAS rep agreed with us and tried to get the 843 processed.  But the examiner just rejected the appeal, claiming that a 1040-X IS the correct method, and we should designate the employer with a CPEO (Certified Professional Employment Organization) exception.  I can't find any reference to this exception in ProSeries.  

Any thoughts??