Residency W2 - No Social Security Withheld

[ElephanHat]

Hello,

My wife is a PGY3 in California at a UC and her taxes don't have any Social Security Income or withholdings. So every year we have to pay back taxes on that.
I see online that back in the early 2000s it was up for debate in the Supreme Court if Residents owed Social Security tax but it was ruled that they DO.

So did she or her program just enter something wrong on her W4 or something? Or is it typical that residents pay back all their Social Security Tax during tax season?

[CordMcNally]

Does she have some kind of visa or do they think she does? This sounds like a mess.

[ElephanHat]

Nope.

Turbotax only has her paying back the 6.2%, not the employer's contribution...but I wonder if they even paid if she doesn't have any Social Security income on her W2.

[CordMcNally]

She isn't responsible for the employer's contribution. She needs to call HR first thing on Monday and get this figured out.

[ENT Doc]

Hold on hold on. Verify she didn’t have an obligatory contribution to a state teacher retirement fund or whatever. Some states allow for this to replace social security so your SS will end up as $0 contribution - that’s OK. Happened to me during residency. Call HR and verify.

[uksho]

Hold on hold on. Verify she didn’t have an obligatory contribution to a state teacher retirement fund or whatever. Some states allow for this to replace social security so your SS will end up as $0 contribution - that’s OK. Happened to me during residency. Call HR and verify.

Exactly . If you have pension in some states, you don’t contribute to SS

[CBCwDiffpls]

UC Residents don't have to pay social security tax on that income. Check her W2, box 3: the social security wages should be either blank, or 0! You definitely shouldn't be paying back taxes.

UC Residents pay 7.5% into a DCP (401a) instead. Much better option IMO. Make sure you change it to a different fund because it defaults to a savings fund (or at least it did when I was there)

[Tim]

UC Residents don't have to pay social security tax on that income. Check her W2, box 3: the social security wages should be either blank, or 0! You definitely shouldn't be paying back taxes.

UC Residents pay 7.5% into a DCP (401a) instead. Much better option IMO. Make sure you change it to a different fund because it defaults to a savings fund (or at least it did when I was there)

State employment was originally not covered under social security. You should not be double taxed under mandatory state retirement plans.

It does impact the IRS retirement savings rules and eventually your benefits. If you want to dig deep into the weeds, start here.

https://www.ssa.gov/pubs/EN-05-10051.pdf

[bean1970]

our residents have mandatory 401(a) contributions in lieu of paying SS. I would check if there were retirement contributions instead.

[ElephanHat]

Yes, as I originally stated she has 0 SS wages and 0 SS taxes so Box 3 and Box 4 are empty. She does have DCP of $47xx on an income of $58,xxx. Now I know what that means!

However, Federal Tax withheld is $51xx.

So - We're just really underpaying on our withdrawals throughout the year because her W4 assumes she's filing married as the only earner. Whoops. Together we make $145k so that means her entire income is in the 22-24% bracket. Sorry Uncle Sam, I'll get it fixed next year. Thanks for the clarification from all the tax wizards.

[2docs2kids]

I was one of those residents in the early 2000s. Some of my peers who filed early amended returns got big checks back and it generated a lot of interesting discussions at the time. I’m glad the WCI forum figured out this mystery for you.

[Tim]

Yes, as I originally stated she has 0 SS wages and 0 SS taxes so Box 3 and Box 4 are empty. She does have DCP of $47xx on an income of $58,xxx. Now I know what that means!

However, Federal Tax withheld is $51xx.

So - We're just really underpaying on our withdrawals throughout the year because her W4 assumes she's filing married as the only earner. Whoops. Together we make $145k so that means her entire income is in the 22-24% bracket. Sorry Uncle Sam, I'll get it fixed next year. Thanks for the clarification from all the tax wizards.

Just a heads up on FIT W/H when transitioning to attending. When you start, paycheck for the last 1/2 or 1/4 year calculates as if you make that rate all year long. Much higher marginal tax rate than the actual comp for that year. Good news is you get a refund (unless you adjust it down).