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W-4 - Allowances, Excess FICA, Students, Withholding

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Why are Social Security and Medicare taxes deducted from my earnings even through I am already collecting Social Security? Can I get these taxes back?

There is no provision in the law for people already collecting social security to be exempt from paying social security and medicare taxes on current earnings.

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If I have overpaid to Social Security or Medicare, can I get that money back?

If you worked for two or more employers, too much social security tax may have been withheld from your pay.There are procedures for taking a credit on your individual income tax return for excess social security tax withheld. There are no provision for receiving a tax credit for medicare that is overpaid. Refer to Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld in Chapter 38 of Publication 17 (PDF), Your Federal Income Tax.

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What can be done if an employer will not withhold income taxes, social security, and Medicare from my pay?

Generally, in situations such as this, the employer is not considering you to be an employee. Rather, you are being treated as an independent contractor (self-employed person). If you cannot resolve this matter with your employer, and if you feel that an employer-employee relationship exists, 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. social security law. Find out from your employer the reason that social security and Medicare taxes are not being withheld from your pay. If you have further questions, contact the IRS at 800-829-0922 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

I am a graduate student and serve as a teaching assistant. I would like to know whether FICA taxes need to be withheld from my paychecks?

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 may be able to tell you whether its students' services are subject to social security and Medicare taxes under a section 218 agreement.

References:

  • Publication 15 (PDF), Circular E, Employer's Tax Guide
  • Federal Regulation section 31.3121(b)(10)-1

As I understand the law, student stipends are exempt from FICA and Medicare taxes. If my university takes these taxes out of my stipend income, can these taxes be recovered in some way?

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 520 (PDF), Scholarships and Fellowships, for information on when a stipend would be a qualified scholarship, which would not be subject to 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 (PDF), Employer's Tax Guide.

If your employer has been 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 (PDF), Claim For Refund and Request For Abatement, can be filed to claim credit for the incorrectly withheld tax.

References:

Is the housing allowance for a minister subject to Social Security Tax and Medicare Tax under FICA?

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. A minister's compensation for services as an employee, as well as from self-employment, is subject to Self-Employment Contributions Act (SECA) taxes, not the Federal Insurance Contributions Act (FICA). 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 who elected and was approved for exemption from Social Security coverage and self-employment tax, your housing allowance would not be subject to social security or Medicare taxes under SECA.

References:

  • Publication 517 (PDF), 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

3.5 Itemized Deductions/Standard Deductions: Medical, Nursing Home, Special Care Expenses
Can social security tax and Medicare tax be deducted on Schedule A, as medical insurance or anywhere else?

Social Security taxes and Medicare taxes imposed on employees are not deductible as medical insurance or pursuant to any other provision. Medicare A expense is not generally deductible. However, If you itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions, you may be able to deduct the monthly premiums paid from your social security check as medical expense.

If you have voluntarily enrolled in Medicare A because you were not otherwise covered, you can deduct your Medicare A premiums. If you are enrolled in Medicare B supplemental medical insurance, the premiums you pay can be deducted as a medical expense. All allowable medical expenses must be reduced by 7.5% of adjusted gross income. For more information, refer to Publication 502 (PDF), Medical Expenses; and Tax Topic 502, Medical and Dental Expenses.

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4.3 Interest, Dividents, Other Types of Income: 1099-MISC, Independent Contractors, and Self-employed
The instructions for Form 1099-MISC, Box 7, say if you are not self-employed, call the IRS for information about how to report any social security and Medicare taxes. I need to know how do I report social security and Medicare taxes if I received income reported on a Form 1099-MISC, but was not self-employed?

You need to use Form 4137 (PDF), Social Security and Medicare Tax on Unreported Tip Income. Cross out the word "Tip" and insert the word "Wages" at the top of the form and also at the top of Schedule U, which is attached to the bottom of the form. Follow the instructions on Form 4137 to compute your share of your social security and Medicare taxes. Attach Form 4137 to your Form 1040. You may call us at 1 800-829-0922 if further clarification of the procedures is necessary.

You may want to file Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding. This form requests the IRS to make an official determination of whether or not you were an employee. To make this determination, the IRS will need information from you and your employer.

References:

  • Form 4137 (PDF), Social Security and Medicare Tax on Unreported Tip Income
  • Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding

I am self-employed. How do I report my income and how do I pay Medicare and social security taxes?

You are a sole proprietor if you are the sole owner of a business that is not a corporation. Report your income and expenses from your sole proprietorship on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or on Form 1040, Schedule C-EZ (PDF), Net Profit from Business.

If the total of your net profit from all businesses is $400 or more, you must pay into the Social Security system by filing Form 1040, Schedule SE (PDF), Self-Employment Tax. For more information on this, refer to Publication 533 (PDF), Self-Employment Tax.

The Federal tax system is based on a pay-as-you-go plan. Tax is generally withheld from your wages or salary before you get it. However, tax is generally not withheld from self-employment income. Thus, you may be required to make estimated tax payments. Publication 505 (PDF), Tax Withholding and Estimated Tax, provides information on making estimated tax payments.

References:

How do you determine if a person is an employee or an independent contractor?

The determination is complex, but is essentially made by examining the right to control how, when, and where the person performs services. It is not based on how the person is paid, how often the person is paid, nor whether the person works work part-time or full-time. There is no statutory definition of what an employee is, but from common law three basic areas have been identified:

  • behavioral control,
  • financial control, and
  • type of relationship.

For more information on employer-employee relationships, refer to Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide. If you would like the IRS to determine whether services are performed as an employee or independent contractor, you may submit Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding.

Unless you have requested a determination by filing Form SS-8, you generally have to report your nonemployee compensation on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You also need to complete Form 1040, Schedule SE (PDF), Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment, if you had net earnings from self-employment of $400 or more. This is the method by which self-employed persons pay into the social security and Medicare trust funds. Generally, there are no tax withholdings on this income. Thus, you may have been subject to the requirement to make quarterly estimated tax payments. If you did not make timely estimated tax payments, you may be assessed a penalty for an underpayment of estimated tax. Employees pay into the social security and Medicare trust funds, as well as income tax withholding, through payroll deductions.

References:

I received a Form 1099-MISC with an amount in box 7, (nonemployee compensation). What forms and schedules should be used to report income earned as an independent contractor?

Independent contractors report their income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). You should also be aware of Form 1040, Schedule SE (PDF), Self-Employment Tax, which must be filed if net earnings from self-employment are $400 or more. This form is used to figure your social security and Medicare tax which is based on your net self-employment income. You may also need to file Form 2210, Underpayment of Estimated Tax by Individuals, Estate & Trust, if you do not make estimate tax payments.

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I made several thousand dollars moonlighting as an independent contractor. What taxes do I need to pay?

You are responsible for Federal income tax and self-employment taxes on your income as an independent contractor. Self-employment taxes are your contributions to Social Security and Medicare. Your self-employment income and expenses will be reported on Form 1040, Schedule C (PDF), Profit or Loss from Business, or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You will also need to use Form 1040, Schedule SE (PDF), Self-Employment Tax, to compute and report your social security and Medicare tax, if you had net earnings from self-employment of $400 or more. Since there is no withholding on your self-employment income, you may need to make quarterly estimated tax payments. This is done using a Form 1040ES (PDF), Estimated Tax for Individuals.

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5.1 Pensions and Annuities: General
My 1099-R forms do not show any FICA or Medicare deductions. Do we pay FICA on retirement?

No, you do not pay social security and Medicare taxes on retirement income.

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12.3 Small Business/Self-Employed/Other Business: Form W-2, FICA, Medicare, Tips, Employee Benefits
Does a household employer have to pay social security and Medicare for all household employees if only one employee makes more than $1,300 in the year?

No. The employer only has to pay social security and Medicare tax for the employee(s) who receive $1,300 or more in wages for the year. If the amount paid to any employee in a calendar year is less than $1,300, no social security or Medicare tax is owed for that employee. If social security and Medicare tax must be paid, the employee's portion of the social security and Medicare tax should be withheld also, unless the employer chooses to pay both the employer's share and the employee's share.

References:

  • Publication 926 (PDF), Household Employer's Tax Guide; Do You Need to Pay Employment Taxes?
  • Tax Topic 756, Employment Taxes for Household Employees

12.6 Small Business/Self-Employed/Other Business: Forms 941, 940, Employment Taxes
If an employee is collecting social security benefits, is the employer required to take out social security and medicare taxes?

Yes, the employer is required to follow the withholding requirements for social security and medicare taxes even if an employee is collecting social security benefits. Per Chapter 9 of Publication 15 (PDF), Circular E, Employer's Tax Guide, 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:

Are housing allowances for ministers subject to social security and Medicare taxes?

Yes, housing allowances for ministers are subject to social security and Medicare taxes, under the Self-Employment Contributions Act. However, if you are a duly ordained, commissioned, or licensed minister of a church, a member of a religious order not under a vow of poverty, or a Christian Science practitioner who elected and was approved for exemption from social security coverage and self-employment tax, your housing allowance would not be subject to social security or Medicare taxes. Refer to Publication 517 (PDF), Social Security and Other Information for Members of the Clergy and Religious Workers, for additional information.

References:

  • Publication 517 (PDF), Social Security and Other Information for 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, and Christian Science Practitioners

We hired a nanny to look after our baby while we work. We would like to make it all legal, i.e. pay her social security taxes and so forth. How do we do this?

A nanny is considered a household employee. A household employer only has to pay social security and Medicare tax for the employee(s) that receive $1,300 or more in cash wages for the year 2002. If the amount paid is less than $1,300, no social security or Medicare tax is owed.The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's share is 7.65%. You can choose to pay the employee's share yourself and not withhold it. You may also be responsible for paying federal unemployment taxes. For directions on household employees, refer to Publication 926 (PDF), Household Employer's Tax Guide.

References:

12.8 Small Business/Self-Employed/Other Business: Schedule C & Schedule SE
I am self-employed. How do I report my income and how do I pay Medicare and social security taxes?

Your self-employment income is reported on Form 1040, Schedule C (PDF), Profit or Loss from Business, or on Form 1040, Schedule C-EZ (PDF), Net Profit from Business.

Your Medicare and social security taxes are reported on Form 1040, Schedule SE (PDF), Self-Employment Tax.

As a self-employed person, you pay your Medicare and social security taxes the same way you pay your income taxes. If you expect to owe less than $1,000 in total taxes, you can pay them when you file your income tax return. If you expect to owe $1,000 or more in total taxes, you will need to make estimated tax payments. These payments are made quarterly using Form 1040ES (PDF), Estimated Tax for Individuals. You will need to figure these taxes at the beginning of the year. To learn about figuring and making estimated tax payments, please refer to Publication 505 (PDF), Tax Withholding and Estimated Tax.

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13.5 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - Tax Withholding
I entered the U.S. in August and I have a J-2 visa with an Employment Authorization (work permit). Can I be considered as a U.S. resident for tax purposes under the substantial presence test? Since my visa does not allow me to stay in this country am I subjected to social security tax and Medicare tax?

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

  • 31 days during the current year, and
  • 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
  • All the days you were present in the current year, and
  • 1/3 of the days you were present in the first year before the current year, and
  • 1/6 of the days you were present in the second year before the current year.

For purposes of the substantial presence test, certain days of physical presence do not count. Please refer to Publication 519 (PDF), U.S. Tax Guide for Aliens, for additional information.

In general, U.S. social security and Medicare taxes apply to payments of wages for services performed as an employee in the United States, regardless of the citizenship or residence of either the employee or the employer. In limited situations, these taxes apply to wages for services performed outside the United States. Your employer should be able to tell you if social security and Medicare taxes apply to your wages.

References:

Under my visa as a temporary nonresident alien, I'm not subject to social security and Medicare withholding. My employer withheld the taxes from my pay. What should I do to get a refund of my social security and Medicare?

If social security tax was withheld in error from pay received which was not subject to the tax, contact the employer who withheld the tax for reimbursement. If you are unable to get a refund from the employer, file a claim for refund with the Internal Revenue Service on Form 843 (PDF), Claim for Refund and Request for Abatement.

Attach the following to your claim:

  • a copy of the [Form W-2], Wage and Tax Statement, to prove the amount of social security tax withheld,
  • a copy of INS Form I-94, Arrival/Departure Record,
  • a copy of INS Form I-538, Application of Nonimmigrant Student (F1) for Extension to Stay, School Transfer or Permission to Accept or Continue Employment, and
  • a statement signed by the student stating that he/she has asked the employer for reimbursement of social security tax withheld in error but has been unable to get a refund.

File the claim for refund (with attachments) with the IRS office where the employer's returns were filed. If you do not know where the employer's returns were filed, file the claim with the Internal Revenue Service Center, Philadelphia, PA 19255

For more information, refer to Publication 519 (PDF), U.S. Tax Guide for Aliens.

References:

I am a U.K. resident and I need to recover withholding tax on a U.S. capital gain. Do I need an ITIN?

Yes, you need to secure an Individual Taxpayer Identification Number, or ITIN. To secure an ITIN, you must file Form W-7 (PDF), Application for IRS Individual Taxpayer Identification Number. Along with the completed Form W-7, you must submit document that verify both your identity, that is, contain your name and photography, and your foreign status. If you have one document that verify both, such as a passport, then that one document is enough. You may, however, have to provide a combination of documents for this purpose.

You can apply for your ITIN by mail or in person at most IRS offices in the U.S. If you apply in person, your documents will be reviewed and returned to you. Publication 1915 (PDF), Understanding Your IRS Individual Taxpayer Identification Number, has a list of IRS offices abroad which can accept Form W-7. If you apply by mail, use the address shown in the W-7 instructions and the Publication 1915. If you send original supporting documentation with your application, your documentation will be returned within 14 days. Once you have applied, you should get acknowledgment that your Form W-7 was received within 14 days; you should receive your ITIN within 4 to 6 weeks.

References:

  • Publication 515 (PDF), Withholding of Tax on Nonresident Aliens and Foreign Corporations
  • Publication 519 (PDF), U.S. Tax Guide for Aliens
  • Publication 1915 (PDF), Understanding Your IRS Individual Taxpayer Identification Number
  • Form W-7 (PDF), Application for IRS Individual Taxpayer Identification Number
  • Tax Topic 857, Individual Taxpayer Identification Number - Form W-7

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