Employers Must Withhold Tax for High Earners

The Affordable Care Act’s 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 things employers need to know about the Additional Medicare Tax:

  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 they begin 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.

Click here for more information from the IRS.

 

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Please Note: The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources which we believe to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose.

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