If you are one of the millions of Americans who have participated in the Great Resignation, you may have unknowingly overpaid your Social Security taxes. It’s not uncommon to be unaware of this aspect of your taxes, but it can result in you losing out on your hard-earned money.
When you change jobs, your new employer should continue to withhold Social Security taxes automatically. However, if you previously overpaid these taxes and are not mindful of the limit, you could be contributing more than the capped amount. The Social Security wage cap for 2021 is $142,800, meaning if you earn that much or more, you would only pay a certain amount of Social Security taxes. If you switch jobs and did not reach the limit with your previous employer, your new employer will not know and could continue to withdraw the same rate from your paychecks, resulting in you overpaying into the Social Security system.
To remedy this, you can claim the overpaid amount on your tax return using Form 1040. Keep track of your wages and the amount of Social Security withholding throughout the year, and make sure you’re within the limit. Remember, every dollar counts!
How to Check Your Social Security Tax Withholding
Checking your Social Security tax withholding is simple, and it can save you money in the long run. First, you need to review your pay stubs or W-2 forms to see how much has been taken out of each paycheck for Social Security. If you reached the Social Security wage cap for the year, no more Social Security taxes should be deducted from your paychecks.
If you think you paid too much Social Security taxes, you can utilize the IRS’S Tax Withholding Estimator to project your overall income and tax liability. If you always switch jobs at the same time each year or have irregular income streams, this resource can help you estimate how much tax you will owe and, ultimately, how much you need to withhold.
Remember, the Great Resignation might have led you to miss out on the Social Security wage cap of 2021. Ensure that you regularly check your tax statements to see if you have paid the correct amount to avoid overpayment. Losing money by overpaying taxes is an experience you can now leave behind with these tips, making sure you keep every dollar you deserve in your pocket where it belongs!