DOUBLE CHECK THAT NEW MEDICARE TAX! Many taxpayers with W-2 wages normally would leave withholding for a new tax for Medicare in the trustworthy hands of their employers. The additional tax is 0.9 percent, and the IRS requires employers to add it to the worker’s basic Medicare withholding (1.45 percent) once earnings reach $200,000. But it’s not a perfect world out there, even on your W-2. We’ve heard reports that a well-known software program used by many small businesses erroneously started withholding the new Medicare surtax on incomes much less than that relatively large $200,000 threshold. Fortunately, employees can get any overpayment back through their tax returns, but, you guessed it, it takes another form. They (or their tax preparers) can file new IRS Form 8959, called “Additional Medicare Tax.” So, are you affected by the software snag? There’s a short way to check by using your W-2. Here’s how: • Locate box 5 (Medicare wages and tips) on the W-2. • Multiply those wages by 1.45 percent, if they are less than $200,000. • Compare the answer with the dollar amount stated in box 6 (Medicare tax withheld). If it’s the same, there’s no problem. The withholding was correct. If it’s much different, the taxpayer should fill out Form 8959 and recover the extra tax withheld. It’s a good idea to make the simple check. Even a small 0.9 percent tax can build into hundreds of dollars on a year’s worth of wages. One last note: Double incomes may force a taxpayer to file the additional Form 8959 anyway. For example, it applies to self-employment wages as well. More questions? We can help at EricJohn Ltd. We pride ourselves on solving tax problems. (But, sorry, we don’t rewrite software!)
Posted on: Sun, 16 Feb 2014 04:02:21 +0000