Doing Your Own Payroll? Deadline to Reimburse Social Security Overwithholding Nears

Joe Popp | March 25th, 2011

If your company does its own payroll, make sure you have reimbursed any 2011 Social Security taxes that may have been overwithheld to your employees by March 31.

The Social Security tax rate was temporarily lowered from 6.2 percent to 4.2 percent as of January 1, 2011 by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. As a result, in 2011, employees pay 4.2 percent Social Security on wages up to $106,800 (the Social Security wage base limit). The employer tax rate for Social Security remained unchanged at 6.2 percent.

When the Act was signed by the president, employers were asked to implement the 4.2 percent employee Social Security tax rate as soon as possible but not later than January 31, 2011. Employers were also instructed to make an offsetting adjustment in a subsequent pay period to reimburse employees for any 2011 Social Security taxes that had been overwithheld as soon as possible, but not later than March 31. 2011.

If your company was delayed in implementing the reduced Social Security tax withholding schedule, make sure that your payroll system has reimbursed employees for the extra two percent that was overwithheld.

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4 Responses to “Doing Your Own Payroll? Deadline to Reimburse Social Security Overwithholding Nears”

  1. Rex says:

    What is the proper procedure for those who over-withheld early on, but failed to make the proper adjustment prior to March 31? How should 1st quarter 941 be filed? Should adjustments be made as soon as possible? Unable to find any help on the govt sites.

  2. You’ve asked a very good question, Rex. We thought other employers may also be asking this question, so we have posted a new blog today (5/5/2011) explaining the process to make the correction.

  3. Pat Stupur says:

    Please send any additional ways to correct this mistake. Have a client that overwithheld all year. Will make the necessary adjustments on the W-2. Is there anything else that needs to be done besides correcting the 941’s?

  4. Hi Pat. Thanks for your comment. My colleague Heather McNichols had this to say, “The 941 form had the correct percentage on line 5a (10.4%) throughout all of 2011. So, assuming that you multiplied the taxable wages correctly and that your intent is to refund the amount over withheld to the employee, you should not have to correct the 941 forms at all. You’re only issue should be to make sure that the W-2’s reflect the correct withholding and that the employee receives the reimbursement for the 2% that was over withheld.”

    Please let us know if you have any other questions.

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