W-2 Summary caps SS withheld as 6.2% of $142,800 for 2021, but that's not what's in W-2

[klimli]

My client has same agency for 2 places he worked, so the agency sent him a W-2 that is combined.  The SS wages are above the limit just as it would if they sent 2 separate W-2s.

But I can enter that and the SS withholdings for the W-2.

The problem is that the W-2 summary has the calculation in it for maximum SS wages and withholdings but clicking thru to the W-2 I can see excess withholdings.

If I override the W-2 summary it gets flagged by the IRS.

And the agency won't correct or split W-2s since it is in their right to combine since they were the payer.

[dascpa]

Interesting rule - if multiple employers the excess Soc Sec is treated as extra Fed withholding.  But if the same employer the IRS requires the employer to correct the W-2 and refund the monies to the employee.  I had this where the employer would not.  Huge battle.  We ended up paper filing with a note to the return and then the employee filed a lawsuit against the employer.  It worked, but not good for getting promoted.

[klimli]

The problem now is the prescribed manner to solve:

1) Enter the W-2 as given, understand no Schedule 3 will be included as ProSeries (and Turbotax) cap what flows from any W-2 to W-2 Summary with maximum SS defined so negates Schedule 3.

2) File form 843 "Claim for Refund and Request for Abatement" with the IRS, but that is a paper form and has no e-file ability.  Meaning the request to have the excess SS withheld be refunded is not expected to be actioned until deep 2023 with the current 2020 paper backlog and soon to be 2021 paper backlog.

Not a fun pill to swallow owing the IRS then waiting a year plus for the actual refund.

[BobKamman]

That's correct -- same EIN, no excess FICA.  And if the employer is a jerk (government agency?) you have to follow the 843 procedure.  Those may not be as backlogged as other claims, but I wouldn't expect a fast refund.  You can review the Internal Revenue Manual on how these are processed; here is part of it.  Note that they still want a statement from the employer. 

21.7.2.4.6.4.2 (02-06-2019)

Excess Social Security and Medicare Tax Withheld — Employee Claims for Refund

1. Treasury Regulations Section 31.6402(a)-2(b) provides that employees may file claims for refund of excess social security and Medicare tax collected in error when the employer has not repaid or reimbursed the employee, nor has the employee authorized employer to file a claim for refund. These claims will generally be filed on Form 843, Claim For Refund and Request for Abatement.

   Caution:

    

   The procedures in this IRM subsection do not apply to excess Additional Medicare Tax (AdMT) withheld by an employer. If a claim is received for excess AdMT, disallow the claim as per the instructions in row 6 or row 7 (as appropriate) of the table in (3) below. Instruct the claimant in the 105C disallowance letter that any excessive withholding of AdMT must be claimed on a Form 1040 or Form 1040-X with attached Form 8959, Additional Medicare Tax.

2. Upon receipt of a claim:

   1. Review the employer’s Form 941 account for the last quarter of the year in which FICA wages were paid. If necessary, review the employee’s Form 1040 to verify claim information.

      Reminder:

       

      Use online research tools whenever possible. Do not request tax returns from Files unless necessary.

   2. The employee must include a statement from the employer indicating the employee has not authorized the employer to file a claim, nor had the employee been repaid or reimbursed by the employer for the amount overwithheld. Verify whether the required statement is attached to the Form 843.

[klimli]

I have Power of Attorney over my client's taxes, so will be conducting the 843 process and already sent him an email to furnish back to me, as he's tried 3 times to get them to cut either separate W-2s, or W-2c.

Anyway, as an Enrolled Agent I did talk to the IRS about why 843 is still paper filed but they could not comment on "why" just "it is".

[qbteachmt]

"so the agency sent him a W-2 that is combined."

"And the agency won't correct or split W-2s since it is in their right to combine since they were the payer."

"That's correct -- same EIN, no excess FICA."

From: https://www.irs.gov/newsroom/employers-use-of-payroll-service-providers

Reporting agent:

"Prepare Form W-3, Transmittal of Wage and Tax Statements, and file and furnish Forms W-2, Wage and Tax Statement, for the employees of the employer using the employer's EIN."

Section 3504 agent:

"An agent appointed under Form 2678 files aggregate returns (e-file or paper) using the agent's EIN."

Certified professional employer organization:

"A CPEO files aggregate returns using the CPEO's EIN."

Someone is doing something wrong. Either they are supposed to also work on their one, combined, gross wage for FICA and one W2; or, they are doing it for the individual employers, resulting in two separate W2 forms being issued. It seems they are coloring outside the lines of whichever functions apply to their actual, contractual, designation.

Their excuse doesn't make sense.