FICA

[Randy Watson]

What can an employer do, if anything, if it knows that the maximum OASDI has been paid on behalf of an employee. For example, say Employee works for Company A from 1/1 to 6/30 and then is transferred to Company B, which is a subsidiary of Company A. Employee's is paid well, so Company A paid the maximum amount of OASDI during the first couple of months of the year. Company B knows how much Company A has paid in OASDI. Is Company B still required to pay OASDI on Employee's salary even though it knows that the full amount required to be paid for that individual has already been met? The same thing can occur if Employee works for Company A and Company B at the same time.

It seems odd that the employee can get the tax credit for his/her overpayment, but an employer cannot get a tax credit or take other action for its overpayment.

[Lori Friedman]

You can find the answer to your question in I.R.C. Sec. 3121(s) and Reg. Sec. 31.3121(s)-1(a). If two or more related entities employ the same individual at the same time, and if one of the employing entities is the common paymaster for all the related employers, use a single Social Security wage base. FICA is determined as if the individual were working for just one employer.

You've described an individual who's transferring from a parent company to its subsidiary. The one-employer rule won't work in this situation, because the individual has to be employed concurrently by both companies. The individual will have to pay Social Security taxes at Company B and claim the amount on his/her individual income tax return.

[oriecat]

No, if the employers are not related, you have to pay the whole amount based on the salary you pay them.

From Reg 31.3121(a)(1)-1

(3) If during a calendar year the employee receives remuneration

from more than one employer, the annual wage limitation does not apply

to the aggregate remuneration received from all of such employers, but

instead applies to the remuneration received during such calendar year

from each employer

[namealreadyinuse]

Not to hijack the thread, but does a PEO outsourcing arrangement qualify for aggregation. The IRS treats the Client Organization as the employer generally, so the PEO is really not a separate employer. Any ideas?

[GBurns]

Shouldn't it be The IRS treats the Client Organization as the employer generally, so the PEO is really a separate employer?

[Lori Friedman]

No, if the employers are not related, you have to pay the whole amount based on the salary you pay them.

Randy began this thread by stating that the 2 employers have a parent-subsidiary relationship.

[oriecat]

Oops, I missed that part. Sorry!