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Additional Medicare Tax Withholding Requirements

  • Additional Medicare Tax  is required to be withheld  from wages or compensation paid subject to Railroad Retirement Act Taxes when that compensation is in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer.  An individual may owe more than the amount withheld by the employer, depending on the individual’s filing status, wages, compensation, and self-employment income.  In that case, the individual should make estimated tax payments and/or request additional income tax withholding using Form W-4, Employee’s Withholding Allowance Certificate.
  • Additional withholding specifically for Additional Medicare Tax may not be requested; however, those that anticipate liability for Additional Medicare Tax in excess of the amount being withheld may request the employer to withhold an additional amount of income tax withholding on Form W-4. The additional income tax withholding will be applied against the total tax liability on the individual’s income tax return (Form 1040), including any Additional Medicare Tax liability.
  • Estimated tax payments for Additional Medicare Tax may also be paid by those that anticipate that they will owe Additional Medicare Tax but will not satisfy the liability through Additional Medicare Tax withholding and did not request additional income tax withholding using Form W-4.  Any estimated tax payments that an individual makes will apply to any and all tax liabilities on the individual’s income tax return (Form 1040), including any Additional Medicare Tax liability.
  • Additional Medicare Tax liability will be calculated on individual income tax returns (Form 1040) when applicable.  Individuals will also report Additional Medicare Tax withheld by their employers on their individual tax returns.  Any Additional Medicare Tax withheld by an employer will be applied against all taxes shown on an individual’s income tax return, including any Additional Medicare Tax liability.  Any shortfall of Additional Medicare Tax withheld below the calculated amount will be added to the total taxes shown on an individual’s income tax return.
  • An individual will owe Additional Medicare Tax on wages, compensation, and/or self-employment income (and that of the individual’s spouse if married filing jointly) that exceed the applicable threshold for the individual’s filing status. For married persons filing jointly the threshold is $250,000, for married persons filing separately the threshold is $125,000, and for all others the threshold is $200,000.
  • An employer must withhold Additional Medicare Tax on wages it pays to an individual in excess of $200,000 in a calendar year even in the event the employee will not owe the tax because of filing a joint tax return that will not meet the $250,000 threshold for Additional Medicare Tax for joint filers. The employer cannot honor a request to cease withholding Additional Medicare Tax under these or any other circumstances. The employee so affected will claim credit for any withheld Additional Medicare Tax against the total tax liability shown on his or her joint individual income tax return (Form 1040) and receive credit for this excess withholding at that time.
  • If an employee has two jobs and neither employer withholds Additional Medicare Tax, but the sum of his or her wages exceeds the threshold at which that individual will owe Additional Medicare Tax the employee should make estimated tax payments and/or request additional income tax withholding using Form W-4. Any additional income tax withheld by an employer and any additional income tax estimated payments made will be applied against all taxes shown on an individual’s income tax return, including any Additional Medicare Tax liability.  For information on making estimated tax payments and requesting an additional amount be withheld from each paycheck, see Publication 505, Tax Withholding and Estimated Tax.
  • Wages that are not paid in cash, such as fringe benefits, are subject to Additional Medicare Tax if, in combination with other wages, they exceed the individual’s applicable threshold. These noncash wages will be subject to Additional Medicare Tax withholding also, if in combination with other wages paid by an employer they exceed the $200,000 withholding threshold.
  • Tips are also subject to Additional Medicare Tax if, in combination with other wages, they exceed the individual’s applicable threshold. These tips will be subject to Additional Medicare Tax withholding also, if in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold.
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