The Affordable Care Act created two new taxes for individuals whose income exceeds $200,000 ($250,000 for married couples filing joint returns). Employees must pay an additional 0.9% Medicare tax on wages in excess of these dollar thresholds. Individuals whose adjusted gross income exceeds the dollar thresholds also must pay a 3.8% tax on their net investment income.
Both taxes became effective in 2013, but high-income employees will pay the taxes for the first time next year, when they file their 2013 tax returns. Employers are required to withhold the 0.9% additional Medicare tax, and are liable for any amount they fail to withhold.
The IRS recently published a final regulation and an updated set of FAQs interpreting the additional Medicare tax. The IRS also published a final regulation, a new proposed regulation, and updated FAQs interpreting the tax on net investment income.
Continue Reading IRS Issues Guidance on New Medicare Taxes for High-Income Employees