Tuesday, December 25, 2018

Social Security Withholding Tax for a New Employee who has reached the limit with the previous employer

Social Security taxes are required to be withheld by employers. If an employee starts a new job halfway through the year and has already earned an amount exceeding the Social Security tax wage base limit with the old or previous employer, the new employer is not allowed to stop withholding until the wage base limit has been earned with the new employer.


The new employer must withhold Social Security starting with the first dollar up to as much as the annual maximum again. The employee will be able to get a credit on his personal tax return Form 1040 when he provides two W-2s with the excess amount of social security. The employer, however, will not get a credit in this case. So, this amount will be paid by both the prior and current employer; employers do not receive a credit in this case.


For more current information on Paying the maximum Social Security tax, please see the official website of the U.S. Social Security Administration

1. http://ssa.gov/

2. http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/216/kw/paying%20the%20maximum%20limit



The following scenarios are mandated to be followed:

1) If Employee AA reached the maximum wage base limit for Social Security for the year at May which is $118,500 employee will stop withholding Social Security taxes on May and will report zero Social Security for the rest of the year.
- Employee gets one W-2.

2) If Employee AA reached the maximum wage base limit for Social Security for the year at June 30 which is $118,500 and then moved to another company (Company Z) at July 15:
-Employee is entitled to Social Security taxes withholding from the time of the move to the new company. This means the new employer (Company Z) should withheld taxes based on every dollar from $1-$118,500.

- Employee should have two w-2s from previous employer (Company X) and current employer (Company Z).

- If employee over withheld $150, it will be credited to his Personal Tax return Form 1040 as long as he provided the two w-2s.

Note: The amounts in the above scenarios are for illustration purposes only.  

DISCLAIMER: This article is written with the undertaking that tax rules and laws are constantly changing and is intended for informational purposes only. The topic is updated up to the Publish Date found at the top portion of this page (below the Subject Title). We are not providing tax consulting or legal advice. If you have any questions concerning your situation or the information provided, please contact your tax consultant, accountant or attorney.

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