Payroll and Additional Medicare Tax – what you need to know

All W-2 wages that exceed $200,000 will have additional withholdings to account for the Additional Medicare Tax.   Withholding additional amounts from W-2 wages is the responsibility of the employer.   While this is a good planning technique for individuals, if you are married and you and your spouse together exceed wages, compensation, and self-employment income of $250,000 (but individually do not exceed $200,000 for the year), this planning technique may not save you from unexpected tax liabilities for the year.  If you and your spouse expect to come close to this threshold for 2013, please contact us to appropriately plan for the Additional Medicare Tax.

Note that while additional withholding is required for employers on W-2 wages over $200,000; whether you will be subject to the Additional Medicare Tax will be determined at the time you file your tax return.  For this reason, if you have additional W-2 withholdings and are determined not to be subject to the Additional Medicare Tax, you will be refunded these additional withholdings.  Please contact us for additional information.