You may have overpaid your Social Security taxes thanks to the Great Resignation

When you have multiple jobs, each employer only knows what they’ve paid you, not your total added together. There’s no way for the payroll systems to talk to each other on the back end. For example, if you worked one job in 2022 and made $100,000 and then switched to another job and made $60,000 more, you’d be $13,000 over the limit and will probably have paid the full tax on that. 

“There are so many issues that come up with the multiple W-2s, but paying excess Social Security is the big one,” says Phyllis Jo Kubey, a tax preparer based in New York who is an enrolled agent with the IRS. 

Kubey has seen an increase in clients with multiple W-2s since the pandemic, not just because of people switching jobs searching for meaning and advancement, but also because her large freelance clientele of artists had to pivot to survive a difficult economy. 

“I have some clients that have over 20 employers,” she says. “Creative people became web designers, they got work in retail stores, and did more teaching. All sorts of things happened.” 

How to get your money back

The amount you could get back in excess Social Security varies based on your total income and how much you’re over the limit. If you had two $500,000 jobs in a year, you’d get back a lot more than if you were over the limit by just $13,000 and were paying just a 20% tax rate. 

When you prepare your taxes and enter more than one W-2 wage statement for an individual, the tax software or tax professional should calculate the excess for you. You’ll see the details on Schedule 3, which is then reported on line 31 of your 1040 form. If you don’t see this show up, then you’ll have to dig further and ask questions. If you’re doing your taxes on your own and filing on paper, you’ll need to make sure to calculate this manually. 

The adjustment could lead you to get a more substantial refund this year, but Kubey cautions people not to get used to this, because it’s a one-time consequence of job changing. “People tend to think the higher refund is because of the new job, and think it’s going to happen all the time,” says Kubey. “And then I have to make sure to explain that unless they have a second job next year too, the refund may be less.”

Tax problems with single jobs

When you stick with one job throughout a year, your payroll system should automatically adjust if you earn above the Social Security wage maximum. High earners often note a slight increase in their paychecks toward the end of the year when they hit the max and stop paying the Social Security tax. “But sometimes some funky things happen,” says Kubey. 

She has seen cases where one employer used a third-party payroll system so it seemed like it was multiple employers, and also times when a single employer has simply withheld the wrong amount. In these circumstances, the taxpayer is supposed to first go back to their employer and ask them to make a correction. If that doesn’t work, there’s a form you can fill out with the IRS, but, Kubey adds, “It can get a little messy.”

In either case of a single employer withholding the wrong amount or multiple employers withholding more than needed, you can try to control the amount that comes out of your paycheck by adjusting the W-4 form you file with your employer. Sometimes this is a process of experimentation. 

Kubey advises her clients to check the box for “single or married filing separately” and then send her their first paystub so she can run an analysis of their total projected income for the year. Then she can see if they need further tweaking down the road so they aren’t taxed more than necessary.