Requesting FICA Tax Refunds For W2 Employees With Multiple Employers

If you are a W2 employee who makes over $160,200 per year and you have multiple employers or you switched jobs during the year, or you have both a W2 job and a self-employment gig, your employer(s) may be withholding too much FICA tax from your wages and you may be due a refund of those FICA tax overpayments. Requesting a FICA tax refund requires action on your part and an understanding of how the FICA tax is calculated.

How is FICA Tax Calculated

If you are a W2 employee, you will see a FICA deduction on your paychecks, which stands for Federal Insurance Contributions Act.   The FICA tax is the funding vehicle for the Medicare and Social Security programs in the U.S.  The 7.65% FICA tax consists of 6.2% for Social Security and 1.45% for Medicare, but the 6.2% allocated to Social Security has a cap, which means the government only assesses the 6.2% tax up to a specified wage limit each year. That wage limit is called the “taxable wage base,” and for 2023, the taxable wage base is $160,200.    Any income up to the $160,200 taxable wage base is assessed the full 7.65% FICA tax, and any amounts over the taxable wage base are just assessed the 1.45% for Medicare since the Medicare tax does not have a cap. 

Note: The IRS taxable wage base usually increases each year.

Employees with Multiple Employers During The Same Tax Year

For employees who work for more than one company during the year and whose total wages are over the $160,200 taxable wage base, this can cause an over-withholding of FICA tax from their wages. 

Example: Sue is a doctor employed by XYZ Hospital and earns $150,000 between January and August, then Sue accepts a new position with ABC Hospital and earns $100,000 between September and December. Both XYZ Hospital and ABC Hospital will withhold the full 7.65% in FICA tax from Sue’s paycheck because she was below the taxable wage base of $160,200 with each employer.  But Sue is only required to pay the 6.2% Social Security portion of the FICA tax up to $160,200 in wages, so she has too much paid into FICA for the year. 

• XYZ Hospital SS 6.2% x $150,000 = $9,300

• ABC Hospital SS 6.2% x $100,000 = $6,200

• Total SS FICA Actually  Withheld:    $15,500

Annual Limit: SS 6.2% x Taxable Wage Base $160,200 = $9,932

Sue’s FICA tax was over-withheld by $5,568 for the year. So, how does she get that money back from the IRS?

Requesting a FICA Tax Refund (Multiple Employers)

A refund of the excess FICA tax does not automatically occur.  In the example above, if Sue identifies the FICA over withholding prior to filing her taxes for the year, she can recapture the excess withholding when she prepares her tax return (1040) for that tax year. The excess FICA withholding is applied as if it were excess federal income tax withholding.

If Sue does not identify the FICA excess withholding until after she has filed her taxes for the year, she could file IRS Form 843 to recover the excess FICA withholding.  Thankfully, it’s a very easy tax form to complete. Timing-wise, it may take the IRS 3 to 4 months to review and process your FICA tax refund.

Requesting A FICA Tax Refund (Single Employer)

The FICA tax refund process is slightly different for individuals who have only one employer.  Payroll mistakes will sometimes happen, causing an employer to over-withhold FICA taxes from an employee’s wages.  In these cases, the IRS requires you first to try to resolve the FICA excess withholding with your employer before submitting Form 843.  If resolving the FICA excess withholding is unsuccessful with your employer, you can file Form 843. 

Self-Employed FICA Tax Refund

For individuals who have both a W2 job and are also self-employed they can also experience these FICA overpayment situations.   Self-employed individuals pay both the employee portion of the FICA 7.65% and the employer portion of FICA 7.65%, for a total of 15.3% on their self-employment income up to the taxable wage base.

For self-employed individuals who are either sole proprietors or partners in a partnership or LLC, they typically do not have wages, so there is no direct FICA withholding as there is with W2 employees.  Self-employed individuals make estimated tax payments four times a year to cover both their estimated FICA and income tax liability.   If these individuals end up in a FICA overpayment situation due to W2 wages outside of their self-employment income, the overpayment can be applied toward their tax liability for the year or result in a refund from their self-employment income.  They typically do not need to file IRS Form 843. 

Note: S-Corp owners do have W2 wages

Requesting A Reduction In FICA Withholding

For employees that are in this two-employer situation, and they know they are going to have W2 wages over the taxable wage base, in a perfect world, they would be allowed to submit a request to one of their employers to either reduce or eliminate the social security portion of their FICA withholding to avoid the over withholding during the tax year.   However, this is not allowed.  Each employer is responsible for withholding the full 7.65% in FICA tax from the employee’s pay up to the taxable wage base, and this approach makes sense because each individual employer has no way of knowing what you earned in W2 wages at your other employers during the year.

3-Year Status of Limitations

If you are reading this article now, but you realize you have had excess FICA withholding for the past few years without requesting a refund, the IRS allows you to go back 3 years to request a refund of those excess FICA withholdings.  Anything over 3 years back and you are out of luck, the U.S. government thanks you for your additional donations to Social Security and Medicare trusts.

The Employer Does Not Get A Refund

FICA tax is paid by both the employee and the employer:

• Employee Social Security: 6.2%

• Employer Social Security: 6.2%

• Employee Medicare:  1.45%

• Employer Medicare:  1.45%

• Total FICA EE & ER:   15.3%

So if the employee works for 2 different companies, they have combined wages over the $160,200 taxable wage base, making them eligible for a FICA refund for the 6.2% of social security tax on wages paid over the wage base, does the EMPLOYER also get a refund for those excess FICA withholdings?

The answer, unfortunately, is “No”. 

If an employee works for 10 different companies and makes $100,000 in W2 wages with each company, each of those 10 employers would withhold the full FICA tax from that employee’s $100,000 in W2 wages, but since the employee had $1,000,000 in combined wages, they would be due a $52,067 refund in FICA wages ($1M - $160,200 x 6.2%). However, the government keeps that full 6.2% that was paid in by each of the 10 employers with no refund due to any of the companies. 

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.