Q: I work at two jobs. Combining both, I might earn over the Social Security maximum taxable earnings limit this year. If I do, how will my employers know when to stop withholding SSA payroll tax?
A: Even though your combined gross earnings from all employers might exceed the maximum SSA taxable earnings, you cannot have them stop withholding SSA payroll tax during the year.
When you have more than one job in a year, each of your employers must withhold Social Security taxes, up to the maximum, from your wages without regard to what the other employers may have withheld. If total Social Security taxes withheld exceed the yearly maximum, claim a refund when filing your personal income tax with the Internal Revenue Service for that year.
For 2012, the maximum taxable earnings for Social Security covered wages or self-employment is $110,100. The maximum for 2009 – 2011 was $106,800. Compared to 2011, of the estimated 161 million workers paying Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the taxable maximum increase. Based on increases in average wages, yearly maximum taxable earnings amounts have changed frequently over the years. Changes automatically take place when there is a cost-of-living adjustment (COLA) for Social Security benefits. Medicare has no tax base limit.
According to the SSA publication, Fast Facts & Figures about Social Security, 2011, of the 157 million workers with earnings in Social Security covered employment in 2010, about 6% had earnings that equaled or exceeded the maximum amount subject to taxes. This compares to 3% when the program began and a peak of 36% in 1965. About 84% of earnings in covered employment were taxable in 2010, compared with 92% in 1937.
Page 9 of “Fast Facts & Figures” contains the following chart showing taxable earnings as a percentage of earnings in covered employment and the percentage of workers with maximum taxable earnings for 1937-2010.