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After 2012, taxpayers with wages in excess of $200,000 ($250,000 if married filing jointly and $125,000 if married filing separately) are required to pay an additional 0.9% Medicare tax. This tax is in addition to the regular Medicare tax rate of 1.45% on wages received by employees. Once an employee's wages exceed $200,000, employers are required to withhold the additional 0.9% tax regardless if the employee may not be liable for the additional tax. If, at the time the taxpayer files their income tax return, there is any excess Medicare tax withheld, there will be a credit against the taxpayer's tax liability.

For taxpayers who are required to pay the 0.9% additional Medicare tax, a Form 8959 ("Additional Medicare Tax") must be filed with their income tax returns. Even if the taxpayer's employer properly withheld the additional 0.9% Medicare tax once the wage threshold was met, the taxpayer must still file Form 8959 because it may be possible that the taxpayer will owe more or less tax than what their employer withheld.

Another item for taxpayers with wages or self-employed income in excess of $200,000 to watch for is adjusting their estimated tax payments to take into consideration the additional 0.9% Medicare tax. In a scenario where a taxpayer and spouse both earning $175,000 each, their employers may not start withholding the additional Medicare tax from each of them since they each have not reached the $200,000 threshold. If filing jointly, they will still be liable for the additional 0.9% Medicare tax since their combined wages exceed the $250,000 married filing jointly threshold. Therefore, if they do not adjust their estimated tax payments, they may be required to pay additional tax and fines on the 0.9% additional tax not being withheld.

If you have questions regarding the additional Medicare tax or filing requirements, please contact your local UHY LLP professional.