Are you Meeting the ACA’s Additional Medicare Tax Withholding Requirements?

January 22, 2014

Under the Affordable Care Act (ACA), beginning in 2013, taxpayers with FICA wages over $200,000 per year ($250,000 for joint filers and $125,000 for married filing separately) have to pay an additional 0.9% Medicare tax on the excess earnings.

Unlike regular Medicare taxes, the additional Medicare tax does not include a matching employer portion. But employers are obligated to withhold the additional tax to the extent that an employee’s wages exceed $200,000 in a calendar year. The $200,000 amount does not include the employee’s income from any other sources or take into account his or her tax filing status. The additional withholding is required even if the employee ultimately will not owe the tax based on a joint tax return liability.

In December 2013, the IRS released final regulations regarding the additional Medicare tax and the employer withholding requirements. The only substantial change from the proposed regulations is that employers no longer have access to relief from payment liability for any additional Medicare tax that was required to be withheld but that they did not withhold — unless the employer can provide evidence that the employee in question has paid the tax.

Please let us know if you have questions about the requirements. We at JPS are always happy to answer your questions and help you ensure that you’re in compliance with these as well as other ACA requirements.