The Internal Revenue Service (IRS) has released Questions and Answers for the Additional Medicare Tax which goes into effect in 2013 as part of Health Care Reform. The Additional Medicare Tax applies to individuals' wages, other compensation, and self-employment income over certain thresholds.

 additional medicare tax

Employers are responsible for withholding the tax on wages and other compensation in certain circumstances. Below is an excerpt of questions and answers that may be of interest to employers.

 

1. When does Additional Medicare Tax start?
Additional Medicare Tax goes into effect for taxable years beginning after December 31, 2012.

 

2. What is the rate of Additional Medicare Tax?
The rate is 0.9 percent.

 

3. When are individuals liable for Additional Medicare Tax?
An individual is liable for Additional Medicare Tax if the individual's wages, other compensation, or self-employment income (together with that of his or her spouse if filing a joint return) exceed the threshold amount for the individual's filing status:

 

Filing Status 

Threshold Amount 

Married Filing Jointly

$250,000

Married Filing Separately

$125,000

Single

$200,000

Head of Household (with Qualifying Person)

$200,000

Qualifying Widow(er) with Dependent Child

$200,000

 

4. What wages are subject to Additional Medicare Tax?
All wages that are currently subject to Medicare tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status.

 

5. When must an employer withhold Additional Medicare Tax?
The statute requires an employer to withhold Additional Medicare Tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year.

 

An employer has this withholding obligation even though an employee may not be liable for the Additional Medicare Tax because, for example, the employee's wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. Any withheld Additional Medicare Tax will be credited against the total tax liability shown on the individual's income tax return (Form 1040).

 

6. Is an employer required to notify an employee when it begins withholding Additional Medicare Tax?
No. There is no requirement that an employer notify its employee.

 

7. Is there an "employer match" for Additional Medicare Tax (as there is with the regular Medicare tax)?
No. There is no employer match for Additional Medicare Tax.

 

8. If an employee's annual Medicare wages are expected to be over $200,000, will an employer withhold Additional Medicare Tax from the beginning of the year or only after Medicare wages are actually paid in excess of $200,000 year-to-date?
An employer is required to begin withholding Additional Medicare Tax in the pay period in which it pays wages in excess of $200,000 to an employee.

 

For More Information

You may review the Questions and Answers for the Additional Medicare Tax in their entirety on the IRS website. Be sure to check out our Summary by Year for other upcoming requirements related to Health Care Reform. And don't forget about the remaining requirements in 2012—download our free 2012 Health Care Reform Checklist and Model Notices to make sure you're compliant.

 

Image Credit: stopnlook

 

Topics: Human Resources, Health Care Reform

Subscribe by Email

New Call-to-action

Recent Blog Posts

Blog Posts by Category

see all

Let's Be Friends: Connect with Us