Overwithheld FICA taxes in 2011? Here’s how to fix it

Chad Bice | May 5th, 2011

What is the proper procedure for those who over-withheld Social Security taxes early on in 2011, but failed to make the proper adjustment prior to the March 31 filing deadline? How should the first quarter 2011 Form 941 be filed?  Should adjustments be made as soon as possible?  I am unable to find any help on the government sites.

The Social Security tax rate was temporarily lowered from 6.2 percent to 4.2 percent for employees 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 over-withheld as soon as possible, but not later than March 31. 2011.

However, if your company was delayed in implementing the reduced Social Security tax withholding schedule and filed the first Quarter Form 941 under the old withholding percentage, file a Form 941-X as soon as possible to properly correct the error and receive a refund. Then refund to your employees the amount that was over-withheld.

You can find Form 941-X here.

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