Additional Medicare Tax on the Employee Record

Beginning 2013, the IRS imposed a new law requiring employees to withhold additional 0.90% Medicare taxes for Taxable earnings in excess of $200,000.00. This is on top of the regular 1.45% employee share in Medicare. In total, employee's income in excess of $200,000.00 is subject to 2.35% in Medicare Taxes. There is no employer share on the Additional Medicare Tax.


Employees cannot ask their employers to withhold the Additional Medicare Tax for wages under $200,000, even if they anticipate they will owe this money due to their spouse's income or other prior employment in the current calendar year. Instead, employees should increase the amount of federal income tax withheld by submitting a revised Form W-4 to their employers.

Notes:

Tax item is missing tax agency error appears on the To Resolve tab of the Update Payroll Information screen once the Additional Medicare payroll item is added in the system. The error can be fixed by assigning an Agency to the payroll item. Users can use the same agency used in the regular Medicare Payroll item.

 

-Navigate to Lists > Employees > Payroll Items.

-Look for the Medicare Employee payroll item, click on View and take note of the Agency.

-Return to the Payroll item Lists and Edit the Additional Medicare payroll item.

-Assign the Agency and Save the record.

-Navigate to Setup > Payroll > Update Payroll Information.

-Tick the Agree box and Commit the Updates.

 

Please refer to page 24 of the 2018 Publication 15: http://www.irs.gov/pub/irs-pdf/p15.pdf 

 

Additional information is also available on: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax.

  

Disclaimer: This article is written with the undertaking that tax forms, rules and laws are constantly changing and the topic is updated at the publish date. 

We are not providing tax consulting and have no control over the websites provided in the article.  For the most current information, please contact your accountant/tax consultant, call the tax agency or visit the government official website.