8 When could overpayment of Social Security taxes occur? How does one go about getting a refund of excess Social Security payments?
9 How is the write-off of a bad debt handled on the tax return? How does the debtor have to handle the forgiveness of the debt? Why?© BrainMass Inc. brainmass.com December 15, 2022, 7:54 pm ad1c9bdddf
8. The overpayment of social security taxes occurs when a highly paid employee changes job mid-year. The new employer is required to deduct social security taxes as if the employee had no other earnings during the year. For example, in 2008 the payment of social security tax was computed on the first $108,000 of earnings in that year. If an employee earned $100,000 on the first job and $50,000 on the second job, there would be excess social security tax withheld on $42,000 of total earnings.
It doesn't matter which company withheld the excess because of the way in which the refund is handled. When the employee prepares his or her personal return for 2008, the excess is reported as a refundable amount and included in any tax refund the ...
The 496 word cited solution explains how social security taxes could be overpaid and how they are refunded. Bad debt and debt forgiveness are discussed including the tax ramifications of both.