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| | {{ForumReplyPost|UserID=Death&Taxes|Date=27 October 2009|Text=Ooops, said that wrong, thank goodness Harry is out getting a PBR. }} | | {{ForumReplyPost|UserID=Death&Taxes|Date=27 October 2009|Text=Ooops, said that wrong, thank goodness Harry is out getting a PBR. }} |
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| | + | {{ForumReplyPost|UserID=JR1|Date=October 28, 2009|Text=A bit late now, but this is where proper entity planning BEFOREHAND pays off big. Making that S an LLC originally would have prevented the company from doing a thing with SS tax, it would have all gone back to the 1040 and he would have only paid up to the limits. Too late now.}} |
Revision as of 00:07, 28 October 2009
Discussion Forum Index --> Advanced Tax Questions --> Excess Social Security Tax
Discussion Forum Index --> Tax Questions --> Excess Social Security Tax
Td2009 (talk|edits) said:
| 27 October 2009
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| I have a question regarding excess social security tax withheld. Taxpayer has two W-2s. The first W-2 is 60000 a year. All taxes are withheld correctly from this employer. Taxpayer also is a shareholder in a S-Corp. 2009 Projected W-2 Wages from S-Corp is 196000, and K-1 income is around 100000. The point of the 196000 is to max the SEP contribution for 2009. How is the social security tax accounted for? Once he reaches 106800 in 2009, should he stop withholding social security from his S-Corp paycheck, and therefore also stop the employers matching portion of social security? I don't see a credit for the employer to reclaim the social security taxes paid. In most situations the employer would not know about this overpayment anyways.
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LH2004 (talk|edits) said:
| October 27, 2009
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| The employee will be entitled to a refund for excess social security taxes withheld. But each employer has to pay its share on wages it pays up to the wage base; employers don't get a discount for hiring someone with a second job.
You'll have to weigh whether the extra IRA assets are worth paying employer FICA on an extra $60,000.
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Td2009 (talk|edits) said:
| 27 October 2009
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| if the employer employs himself, can he adjust social security wages to compensate for the social security wagebase limit?
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Kevinh5 (talk|edits) said:
| 27 October 2009
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| he can adjust wages for reasonable compensation - just have him do less work or hire someone else to do part of the work.
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Td2009 (talk|edits) said:
| 27 October 2009
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| i don't want to adjust wages because I want to be able to maximize the sep contribution. the overall tax savings is greater with the sep contribution. I figured it would be around 17,000 in savings with a 49,000 contribution
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Kevinh5 (talk|edits) said:
| 27 October 2009
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| you are, of course, taking into consideration the elective deferrals at his first job, correct?
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Td2009 (talk|edits) said:
| 27 October 2009
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| yes, there are no elective deferrals with the first job
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Kevinh5 (talk|edits) said:
| 27 October 2009
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| then the savings is reduced by the company's portion of the 'wasted' excess FICA - for example, on 60,000 3,720 is wasted
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Death&Taxes (talk|edits) said:
| 27 October 2009
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| Or to be fair, 3720 times your tax bracket, since the amount will reduce the S Corp profit.
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Death&Taxes (talk|edits) said:
| 27 October 2009
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| Ooops, said that wrong, thank goodness Harry is out getting a PBR.
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JR1 (talk|edits) said:
| October 28, 2009
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| A bit late now, but this is where proper entity planning BEFOREHAND pays off big. Making that S an LLC originally would have prevented the company from doing a thing with SS tax, it would have all gone back to the 1040 and he would have only paid up to the limits. Too late now.
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