Social Security and Medicare are funded in large part through payroll taxes imposed by the Federal Insurance Contributions Act or “FICA.” FICA imposes a tax of 15.3% on “wages,” which is paid by the employer and by employees, each party paying half. Before 2013, the employer portion of the tax (the so-called “hospital insurance” or “HI” portion) was 1.45% and the employee portion was also 1.45%. 1 The Patient Protection and Affordable Care Act (the “Act”) imposes an additional tax — referred to as the “Additional Hospital Insurance Tax on High- Income Taxpayers and Unearned Income” or, simply the “Additional Medicare Tax” — that increases the employee portion of the HI tax by 0.9% of wages on workers with incomes of over $200,000 for single filers and $250,000 for joint filers effective for taxable years commencing after December 31, 2012.
Employers are responsible for withholding the Additional Medicare Tax. The tax is also levied on self-employed individuals whose incomes exceed the specified thresholds. (Self employed individuals are not permitted to deduct this additional tax as a business expense.) Liability for the Additional Medicare Tax is on the employee only — there is no employer match.
Please see full alert below for more information.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.
Topics: 3.8% Medicare Tax, Affordable Care Act, Deferred Compensation, IRS, Medicare, Wages
Published In: Administrative Agency Updates, Health Updates, Insurance Updates, Labor & Employment Updates, Tax Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Mintz Levin - Employment Matters | Attorney Advertising