Additional Medicare Tax on High-Income Taxpayers – Part 4
Thanks for coming back to read part 4 of our commentary of items from the Health Care
Reform Act that will come into effect starting in 2013. If you missed the first 3 part os our
commentary you may view them here. Today we will discuss the impact of the Additional
Hospital Insurance Tax, also known as the Additional Medicare Tax. The 0.9 percent tax will
be imposed in addition to the already in place 1.45 percent Medicare wages for certain “high-
income” taxpayers. This additional tax will be imposed on any taxpayer (with the exception
of corporations, trusts, and estates) who receive wages with repsect to employment during any
tax year beginning after December 31, 2012, in excess of $200,000 ($250,000 for a joint return
or $125,000 for those filing separately), as originally stipulated in the Patient Protection and
Affordable Care Act and amended by the Health Care and Education Reconciliation Act of 2010.
For taxpayers earning more than $200,000, the employer should withhold the additional amount
to meet the requirement. At the end of the day, however, it is the responsibility of the taxpayer
to ensure that this requirement has been met. There may be situations for married couples
who individually make less than $200,000, but jointly make in excess of $250,000, to find it
necessary to make estimated payments in order to cover the additional tax. For example, if
spouse A makes $100,000 and spouse B makes $175,000, they would be subject to the additional tax, but neither would have had the additional tax withheld by their employer. Please consult your tax adviser if you find yourself in this situation.
Please note that the 0.9 percent additional tax also applies to self-employed taxpayers.
Unfortunately, the one-half of self-employment taxes which are deductible under Code Sec.
164(f) do not include the additional Medicare tax.
The additional Medicare tax will require practitioners to monitor their clients’ situation carefully
as it relates to this new tax payment requirement. In addition, many practitioners feel that there
will be an uptick in the taxpayers incorporating under the provisions of subchapter S as active S
corporation income would not be subject to this additional payroll tax.
2013 will prove to be an interesting year for both tax practitioners and taxpayers alike as it
relates to the new tax provisions. As always, please work with your tax adviser to determine
steps you should take.
On November 30, 2012 the IRS and Treasury released proposed regulations to help employers
and individuals implement the new tax. You may review the proposed regulations by following
this link:
http://www.gpo.gov/fdsys/pkg/FR-2012-12-05/pdf/2012-29237.pdf
Thanks for coming back to read part 4 of our commentary of items from the Health Care
Reform Act that will come into effect starting in 2013. If you missed the first 3 part os our
commentary you may view them here. Today we will discuss the impact of the Additional
Hospital Insurance Tax, also known as the Additional Medicare Tax. The 0.9 percent tax will
be imposed in addition to the already in place 1.45 percent Medicare wages for certain “high-
income” taxpayers. This additional tax will be imposed on any taxpayer (with the exception
of corporations, trusts, and estates) who receive wages with repsect to employment during any
tax year beginning after December 31, 2012, in excess of $200,000 ($250,000 for a joint return
or $125,000 for those filing separately), as originally stipulated in the Patient Protection and
Affordable Care Act and amended by the Health Care and Education Reconciliation Act of 2010.
For taxpayers earning more than $200,000, the employer should withhold the additional amount
to meet the requirement. At the end of the day, however, it is the responsibility of the taxpayer
to ensure that this requirement has been met. There may be situations for married couples
who individually make less than $200,000, but jointly make in excess of $250,000, to find it
necessary to make estimated payments in order to cover the additional tax. For example, if
spouse A makes $100,000 and spouse B makes $175,000, they would be subject to the additional tax, but neither would have had the additional tax withheld by their employer. Please consult your tax adviser if you find yourself in this situation.
Please note that the 0.9 percent additional tax also applies to self-employed taxpayers.
Unfortunately, the one-half of self-employment taxes which are deductible under Code Sec.
164(f) do not include the additional Medicare tax.
The additional Medicare tax will require practitioners to monitor their clients’ situation carefully
as it relates to this new tax payment requirement. In addition, many practitioners feel that there
will be an uptick in the taxpayers incorporating under the provisions of subchapter S as active S
corporation income would not be subject to this additional payroll tax.
2013 will prove to be an interesting year for both tax practitioners and taxpayers alike as it
relates to the new tax provisions. As always, please work with your tax adviser to determine
steps you should take.
On November 30, 2012 the IRS and Treasury released proposed regulations to help employers
and individuals implement the new tax. You may review the proposed regulations by following
this link:
http://www.gpo.gov/fdsys/pkg/FR-2012-12-05/pdf/2012-29237.pdf
This is a continuation, from Part 3 located here
http://exactcpa.blogspot.com/2013/01/medical-care-itemized-deduction.html
This is a continuation, from Part 2 located here
http://exactcpa.blogspot.com/2012/12/allowable-contributions-to-health.html
Which is a continuation, from Part 1 located here
http://exactcpa.blogspot.com/2012/12/what-does-2013-mean-for-you-in-terms-of.html
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