# Wage base carryover

Whether the seller's year-to-date wages count toward the buyer's FICA cap.

The Social Security wage base is counted per employer per year, so after a mid-year sale the buyer can find an employee's count restarted at zero, owing employer Social Security tax on pay the cap would otherwise have excluded. The regulation carries it across on three conditions and all three are required. The buyer acquired substantially all the property used in the trade or business, or in a separate unit of it. The employee worked for the seller immediately before the sale and works for the buyer immediately after. And the wages were paid earlier in the same calendar year. How the deal was structured does not matter, which is the part that surprises people, because the rule says outright that the method of acquisition is immaterial. It bites hardest where somebody is paid above the cap, which in a small business usually means the owner and one or two managers. Get the seller's year-to-date payroll register at closing, and do not let a week pass between the last payroll and the first.

In numbers: A manager paid $150,000 by the seller through August earns $75,000 more from the buyer by December. With the carryover the buyer owes the 6.2% employer tax on $34,500, what is left under the 2026 base of $184,500; without it, on all $75,000, or $2,511 more in tax.

Source: https://searchspheresource.com/glossary/wage-base-carryover
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