When an employee is hired by a second employer in the same year after earnings with a first employer, how should the second employer treat the employee's earnings as of the first wage payment?

• A. Start accumulating Social Security, Medicare, and FUTA wages, and withhold both social security and Medicare taxes
• B. Start accumulating Medicare wages only and withhold Medicare tax
• C. Start accumulating Social Security, Medicare and FUTA wages, but withhold Medicare tax only
• D. Start accumulating Medicare wages only, but withhold both Social Security and Medicare taxes

Answer: (A)

When an employee has earnings from more than one employer in the same year, the second employer must treat those wages as part of the employee’s year-to-date totals for certain payroll taxes. Specifically, Social Security and Medicare tax withholding should reflect the employee’s total earnings across both jobs going into the year.

Medicare has no wage base limit, so Medicare tax should be withheld on all wages paid by the second employer to that employee. Social Security does have an annual wage base limit, so the second employer will withhold Social Security tax on the employee’s wages paid by them only up to the remaining portion of that year’s Social Security base, taking into account what the first employer already paid. In other words, the second employer continues to withhold Social Security tax on their portion until the combined wages across both employers reach the annual base, after which no further Social Security tax is due for the year.

FUTA operates separately for each employer. The second employer should start counting FUTA wages from their own payment to the employee and withhold FUTA tax on those wages up to that employer’s own FUTA wage base, independent of what the first employer paid.

So, the second employer should start accumulating and withholding Social Security and Medicare taxes on their own wages for the employee, and also track FUTA wages for their own payroll, to ensure proper tax withholding and base utilization across the year.