Health Care Reform

5 Things to Know About Additional Medicare Tax

Employers Must Withhold Additional Medicare Tax for High Earners

Additional Medicare Tax applies to an individual’s wages that exceed a threshold amount based on his or her filing status ($250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately and $200,000 for all other taxpayers). The following are five important reminders about the requirement:

  1. Employers are required to withhold Additional Medicare Tax (at a rate of 0.9%) on wages or compensation paid to an employee in excess of $200,000 in a calendar year.
  2. An employer has this withholding obligation even though an employee may not be liable for Additional Medicare Tax because, for example, the employee’s wages do not exceed the applicable threshold for his or her filing status. Any withheld Additional Medicare Tax will be credited against the total tax liability shown on the individual’s income tax return.
  3. Employers are not required to notify an employee when it begins withholding Additional Medicare Tax.
  4. There is no employer match for Additional Medicare Tax.
  5. 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.

Final regulations provide additional guidance for employers, including the process for adjusting underpayments and overpayments of Additional Medicare Tax.

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