No matter which way you file, we guarantee 100% accuracy and your maximum refund. The standard Medicare tax is 1.45%, or 2.9% if you’re self-employed. Taxpayers who earn above $200,000, or $250,000 for married couples, will pay an additional 0.9% toward Medicare. The Additional Medicare Tax helps fund some of the features of the Affordable Care Act.

About Form 8959, Additional Medicare Tax

• There is no regular withholding for self-employment tax, so if you expect that your income might be above the levels above, you may need to increase your estimated tax payments to account for the additional Medicare tax.
• The tax is applied to the lesser of an individual’s net investment income or the amount by which the modified adjusted gross income (MAGI) exceeds a certain threshold.
• But with the higher checks could come additional tax burdens.
• The Medicare tax is simply that percentage – 2.9% in total – and it applies to all wages.
• M’s employer also must withhold Additional Medicare Tax on any other wages paid in December 2013.

Your employer cannot honor a request to cease withholding Additional Medicare Tax if it is required to withhold it. You will claim credit for any withheld Additional Medicare Tax against the total tax liability shown on your individual income tax return (Form 1040 or 1040-SR). As an employer, you must withhold Additional Medicare Tax on wages you pay to your employee in excess of the $200,000 withholding threshold in a calendar year.

What does the additional Medicare tax pay for?

• Enter the result here, then proceed to Part II (self-employment income), Part III (RRTA income) as applicable.
• The following TurboTax Online offers may be available for tax year 2024.
• The employee may need to make estimated tax payments to cover any shortage.
• Employers contribute 1.45% for each employee, based on the employee’s monthly earnings.
• Attach Forms 8919 and 8959 to your income tax return (Form 1040 or 1040-SR).

The additional tax rate is 0.9% of all Medicare wages, RRTA compensation, and self-employment income above the threshold amounts. For example, John Smith is a single taxpayer with $250,000 in Medicare wages. On top of his normal Medicare tax, John would pay an additional 0.9% on the $50,000 he earned above the threshold amount, or $450. In Part I, taxpayers will calculate the total additional tax on employee’s wages. If you have no Medicare wages but you have self-employment income, skip to Part II.

Generally, if you provide wages in excess of the $200,000 withholding threshold to the employee leasing company to pay to an employee that performs services for you, Additional Medicare Tax should be withheld from the wages in excess of $200,000. Taxpayers should be aware that the employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward tax payments to a third party to make the tax deposits, you may be responsible as the employer for the tax liability. The imputed cost of coverage in excess of $50,000 is subject to social security and Medicare taxes, and to the extent that, in combination with other wages, it exceeds $200,000, it is also subject to Additional Medicare Tax withholding. Uncollected taxes are not reported in boxes 4 and 6 of Form W-2.

Taxable Wages

All RRTA compensation that is currently subject to Medicare Tax is subject to Additional Medicare Tax if it is paid in excess of the applicable threshold for an individual’s filing status. All FAQs that discuss the application of the Additional Medicare Tax to wages also apply to RRTA compensation, unless otherwise indicated. 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. For more information on what wages are subject to Medicare Tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15, (Circular E), Employer’s Tax Guide. The Medicare tax rate is 2.9% of the employee’s taxable wages, with 1.45% paid by the employee and 1.45% paid by the employer.

Social Security and Medicare withholding rates

The FICA tax rate, which is the combined Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent, remains 7.65 percent for 2020 (or 8.55 percent for taxable wages paid in excess of the applicable threshold). If you have met the threshold for Additional Medicare Tax based on your filing status, wages, compensation, and self-employment income, it is possible that you will owe more or less Additional Medicare Tax than the amount that was withheld by your employer. Noncash wages and RRTA compensation are subject to Additional Medicare Tax withholding, if, in combination with other wages, or with other compensation in the case of RRTA compensation, they exceed the $200,000 withholding threshold.

Additional Medicare Tax for Self-Employed Individuals

These taxes must also be paid by self-employed individuals in the form of self-employment tax. An employer that does not deduct and withhold Additional Medicare Tax as required is liable for the tax unless the tax that it failed to withhold from the employee’s wages is paid by the employee. An employer is not relieved of its liability for payment of any Additional Medicare Tax required to be withheld unless it can show that the tax has been paid by filing Forms 4669 and 4670.

IRS Form 2210 Instructions

An employer is responsible for withholding the Additional Medicare tax from wages or railroad retirement (RRTA) compensation it pays to an employee in excess of $200,000 in a calendar year, without regard to filing status. An employer must begin withholding Additional Medicare tax in the pay period in which the wages or railroad retirement (RRTA) compensation paid to an employee for the year exceeds $200,000. The employer additional medicare tax 2020 then continues to withhold it each pay period until the end of the calendar year. Additional Medicare Tax withholding applies only to wages paid to an employee that are in excess of $200,000 in a calendar year.

As part of the Federal Insurance Contributions Act (FICA), the Social Security Administration (SSA) collects payments from taxpayers that go toward funding Medicare. Medicare beneficiaries with higher incomes must pay what’s known as income-related monthly adjustment amounts, or IRMAAs, for their Part B and Part D premiums. Notably, President-elect Donald Trump has said he wants to nix taxes on Social Security benefit income, though it remains to be seen whether that change will be put into effect.

You must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, to report your wages and compute any Social Security and Medicare taxes due. Attach Forms 8919 and 8959 to your income tax return (Form 1040 or 1040-SR). Tips are subject to Additional Medicare Tax, if, in combination with other wages, they exceed the    individual’s applicable threshold. Tips are subject to Additional Medicare Tax withholding, if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold.

Surtaxes were originally introduced in 1967, when President Lyndon B. Johnson proposed a 6% surcharge on corporate and individual income taxes. However, it did not take effect until ten months later in 1968 when it was signed into law in the Revenue and Expenditure Control Act of 1968. Medicare tax is paid by taxpayers to specifically fund Medicare Part A hospital insurance, which offers coverage for hospital inpatient care, skilled nursing facility care, hospice care and certain types of home health care for individuals enrolled in Medicare.