"Excess social security and tier 1 RRTA tax withheld" on line 69 of Internal Revenue Service Form 1040 (U.S. Individual Income Tax Return) is a definitive number, resulting from an entry on the taxpayer's Form W-2 (Wage and Tax Statement). The amount is not subject to interpretation or judgment of the taxpayer. If the taxpayer has only one employer -- and therefore only one Form W-2 -- the amount on this line can only be zero.
Fixed Rate of Social Security Withholding Tax
Every private (i.e. non-government) employer is required to withhold a fixed 6.2 percent of each employee's salary to pay into the Social Security system. The employer makes a matching contribution. However, there is a cap ($113,700 in 2013) on the amount of salary subject to Social Security withholding, resulting in a maximum withholding amount of $7,049.40 per employee, per calendar year.
RRTA Tax Withholding on Railroad Salaries
Tier 1 RRTA tax withholding is the Social Security equivalent for railroad employers. For 2013, the rate and maximum salary subject to Tier 1 RRTA tax withholding are the same as Social Security: 6.2 percent of $113,700 -- $7,049.40 -- per employee, per calendar year.
W-2 Form Reporting
If a taxpayer has more than one employer but does not earn more than $113,700 from any one employer, each employer will withhold 6.2 percent of wages paid during the calendar year 2013. These amounts will be reported by each employer on a Form W-2. An employer is not expected to know that you have other wage income, which could put you over the annual maximum amount.
Putting It All Together
When the taxpayer adds up the multiple Forms W-2 and enters the result on the annual Form 1040 for the calendar year, if total taxable wages exceed $113,700, there will be excess Social Security (or RRTA) withholding. Since no employer was wrong to withhold the tax, the taxpayer cannot look to any of the employers for a refund of the excess amount. The IRS corrects this by allowing the taxpayer to take a credit for the excess of the combined Social Security (or RRTA) withheld over the cap of $7,049.40, offsetting the income tax liability for that year. The Social Security Administration benefits by receiving all of the Social Security tax from the multiple employers. Excess Social Security tax is not refunded to the employer.