Excess Social Security Not Calculating Correctly - ProSeries Professional

[rkohara01]

I have a client whose Box 3 and 5 amounts are both $225389.99 on a single W-2 (the result of a mid-year merger so not a typo).  SS Tax withheld in Box 4 is $13974.73.  Proseries Professional is NOT applying the excess the Schedule 3 Line 11 as an overpayment.  I tried splitting the W-2 into 2 entries but no joy.  Interestingly when I change the EIN on the second entry it works.  But of course I can't file that way.

Any ideas??  

Bob

[sjrcpa]

You can only use excess SS wh on a 1040 if it is from 2 or more employers.

If one employer withheld too much, the client has to get a refund from the employer.

[Just-Lisa-Now- · Accepted solution]

They need to get that excess back from the employer.

You can only get excess on the tax return if it was due to having multiple employers.

[rkohara01]

Thanks!  Appreciate the prompt reply.

Bob

[rkohara01]

Well, I think I found a solution.  Going back to the source for the Excess SS on Schedule 3 I found a Smart Worksheet (Part II, Line 10).  ProSeries populates the calculated excess in a field that can be overwritten.  I just amended the return to claim the excess SS and it passed Intuit edits.  Just to be sure I attached a pdf of the W-2.  Hopefully this will work.

Bob

[TaxGuyBill]

That is the wrong way to do it.

Did the client ask the employer to refund it?  As was mentioned before, that is the correct way to do it.  If the employer refused to correct it, then you should file Form 843 to get it refunded.  It should not be on the 1040.

[rkohara01]

Yes, employer refused.  Wasn't aware of Form 843, so thanks for the tip. I'm curious as to why a separate form is required since excess SS when there are 2 employers is handled via the 1040.

Bob

[abctax55]

 Interestingly when I change the EIN on the second entry it works

*ONE*  EIN  means ONE employer.  They *merged* payroll incorrectly.  The employer is the one that needs to refund the money.  

[Terry53029]

As others have informed you, if only one employer you can't claim on your tax return. here is an IRS link 

https://www.irs.gov/taxtopics/tc608.

[TeresaG]

First post- so be patient.  I prepared a MFJ return- 2 W2's.  The first time I prepared the return and sent to client, they came back and said they did a TT return and received $2,000 more in refund. I went back to my return, the numbers looked right so I stood by my software. Client decides to file with TT. I came back to my software trying to figure out how the refund was off that much. I took one W2 out of the system and reentered the numbers, then the software calculated the overpayment of SS taxes on Schedule 3 - What did I do wrong the first time? 

[Just-Lisa-Now-]

If you assigned both W2s to the same person, instead of one to each person (MFJ), it could create an erroneous excess SS calculation.

IRS catches those a year or two down the line.

[TeresaG]

I understand completely what you are saying. That is probably what the client did and thus creating an excess of SS withheld. When I remove the Spouses W2 x, my software does create that credit. I thought I was going crazy there for a moment.  Thank you  

[Just-Lisa-Now-]

With only 1 w2 per person, an excess SS situation cant occur.

[abctax55]

OK... free advice here 🙂

WHEN they come back to you to fix what they screwed up (unless you are nice enough to tell them NOW, so they can amend/correct.... and nice enough to tell them that they shouldn't cash that big refund check....which if it's direct deposit they have no choice)

****     GET paid up front   ****

[TeresaG]

Thank you for that advice . I have tried to advise her and show her but she thinks she’s right. I’m done!!   Her big refund was DD today . She has refused to pay my invoice. Can’t wait to get that email from her requesting help when the IRS wants their money back…..

[abctax55]

I know what 'I' would say when (if) that call comes in.   But I'm in the 'closer to retirement' position & can afford to be picky about who I help.  I'm sorry you are having to eat the fee.

It'll be interesting to see if she has the ba((s to call you or is too embarrassed and calls someone else.  OR, berates & blames TurbohhhhhTax for doing it 'wrong'.

[Just-Lisa-Now-]

12-18 months from now, she'll be crying over the IRS notice, no fixing that, she just gonna have to pay it.

[BobKamman]

How did you find this client?  Here's a hint.  Don't look for new clients there anymore.

Other countries manage to match payroll reports with tax returns, at time of filing.   IRS is sort of Third World when it comes to this, especially with having to rely on Social Security to collect the data.  But you can turn this into a marketing opportunity, by telling current and prospective clients about the loser who wouldn't listen to you and is now sitting on a ticking CP2000 time bomb she refuses to acknowledge.  Great example of why your expertise is needed, and DIY can be a disaster. 

Too bad the adjustment is under $5,000 so the 20% Section 6662 penalty won't kick in.

[TeresaG]

Actually this was a referral client but I have been preparing their return for several years. She had issue last year when she understated her income for the premium tax credit and ended up having to repay some of the credit back .  Luckily Covid came along and she ended up not having to pay it back . She has been removed from my client list .

Thanks for the marketing tip ..