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Texas teachers do not pay into social security. Why do I keep getting penalized on my federal return?

Forum|Forum|5 years ago
January 28, 2021
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Because I pay into TRS instead of social security, my return is drastically diminished.

TurboTax Deluxe Online

Best answer by xmasbaby0

No, your refund is not being affected by Social Security. You are misinterpreting something. The software does not use Social Security withheld to calculate your refund/tax due unless you had excess SS withheld by several employers. Otherwise it is not even used in the calculations. TurboTax is well aware that many teachers do not pay into Social Security because they pay in to Teachers Retirement instead. When you enter your W-2, the software uses the income amount from your box 1. Your W-2 shows that you paid into TRS. Enter the W-2 exactly as it appears.

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xmasbaby0Answer

No, your refund is not being affected by Social Security. You are misinterpreting something. The software does not use Social Security withheld to calculate your refund/tax due unless you had excess SS withheld by several employers. Otherwise it is not even used in the calculations. TurboTax is well aware that many teachers do not pay into Social Security because they pay in to Teachers Retirement instead. When you enter your W-2, the software uses the income amount from your box 1. Your W-2 shows that you paid into TRS. Enter the W-2 exactly as it appears.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

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xmasbaby0

Teachers and Social Security

There are 15 states (AK, CA, CO, CT, IL, LA, MA, ME, MO, NV, OH, TX) in which teachers do not pay in to Social Security, so you will not see Social Security withheld on the teacher’s W-2. Instead, teachers in those states pay in to a Teacher’s Retirement System, which will show up elsewhere on the W-2 often in box 12 or box 14.

There are three states which have varying degrees of participation in SS for teachers, depending on school districts—GA, KY, and RI.

Why Does Social Security Leave Out Teachers in These 15 States?

Some state government employees, including teachers, don't pay Social Security payroll taxes and aren't entitled to retirement benefits from Social Security. The history of this practice dates all the way back to Social Security's formation, when the law was intended to cover only private employees. At the time, it wasn't clear whether the federal government could force states to pay payroll taxes. Only in the 1950s did the rules change, allowing states to have the ability to join Social Security.

The majority of states elected to enroll their government workers in Social Security. At that point, those workers started paying payroll taxes, and they earned their retirement benefits in the same way as any other worker.

However, not every state participated. Now teachers in 12 states -- Alaska, California, Colorado, Connecticut, Illinois, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, and Texas -- don't have coverage arrangements with Social Security. In addition, three other states -- Georgia, Kentucky, and Rhode Island -- have varying degrees of coverage that differ by school district.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

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KTK

So my spouse is a California teacher (non K-12; higher education). I noticed there is no federal income tax withheld on their W-2 and it says EXEMPT on their tax status when they look up on their school's website for employees.

So when I create a joint-filing, I noticed the federal tax liability is significantly higher. Is there a way to adjust to make note of this exemption (if any?) or do we need to do our taxes as married, but filed separately? Thanks!