Additional Medicare Tax

  • Additional Medicare Tax must be withheld from an individual’s wages or compensation subject to Railroad Retirement Tax Act (RRTA) taxes 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.
  • An individual may not request additional withholding specifically for Additional Medicare Tax; however, an individual who anticipates liability for Additional Medicare Tax may request that the employer withhold an additional amount of income tax withholding on Form W-4. The additional income tax withholding will be applied against all taxes shown on the individual’s income tax return (Form 1040), including any Additional Medicare Tax liability.
  • An individual may need to make estimated tax payments for Additional Medicare Tax if the individual anticipates he or she 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.  The estimated tax so paid will be applied against all taxes shown on the individual’s income tax return (Form 1040), including any Additional Medicare Tax Liability.   An individual should consider the estimated total tax liability in light of wages, other compensation, self-employment income, and the applicable threshold for your filing status when determining whether estimated tax payments for Additional Medicare Tax are necessary in addition to estimated tax payments that may already apply for other income such as investment income.
  • Estimated tax payments to pay an expected liability for Additional Medicare Tax are not identified as specifically for this tax.  Instead, any estimated tax payments that an individual makes will apply to any and all tax liabilities on the individual income tax return (Form 1040), including any Additional Medicare Tax liability.
  • Individuals liable for Additional Medicare Tax will calculate this liability on their income tax returns (Form 1040).   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 excess or shortfall of withholdings compared to actual tax liability will constitute a refund or balance due on the individual income tax return (Form 1040).  Individuals should be careful not to allow such a balance due to exceed 10% of the total tax liability in order to avoid a penalty for underpayment of income tax.
  • An individual will not owe Additional Medicare Tax on all wages, compensation, and/or self-employment income, but only the tax on the wages, compensation, and/or self-employment income in excess of the threshold for the individual’s filing status (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 employee in excess of $200,000 in a calendar year even if the employe will not owe the tax because together with a spouse on a joint return they will not meet the $250,000 threshold for joint filers. The employer cannot honor a request to cease withholding Additional Medicare Tax if it is required to withhold it. The employee will claim credit for any withheld Additional Medicare Tax against the total tax liability shown on the individual income tax return (Form 1040).  Any amount withheld in excess of the total tax liability of the taxpayer for all taxes will be refunded.
  •  An employee who anticipates an Additional Medicare Tax liability due to multiple jobs or self-employment income but will not satisfy the liability through Additional Medicare Tax withholding due to not exceeding the $200,000 threshold in a calendar year by any one employer) should make estimated tax payments and/or request additional income tax withholding using Form W-4. 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 and Additional Medicare Tax withholding if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold.
  • Tips  are also subject to Additional Medicare Tax and Additional Medicare Tax withholding, if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold.
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