Additional Medicare Tax

Episode 71: In this episode, Timalyn addresses the additional Medicare tax that taxpayers are faced with when they reach they reach a certain income threshold.

Before getting into the episode, Timalyn warns taxpayers not to go exempt on their W-4 because the government is shut down. She reminds taxpayers that they will still be responsible for the tax due when they file their taxes in the Spring.

What is the additional Medicare Tax?

The additional Medicare tax was created to help fund the tax provisions in the Affordable Care Act. This includes the premium tax credit.

The tax amount is 0.9% of self-employment income, and railroad retirement (RRTA) compensation that exceeds certain income thresholds that are set based on filing status.

The threshold for single and head of household taxpayers is $200,000. It is $125,000 for married taxpayers who file separately, and $250,000 for taxpayers who are married filing jointly.

How is the additional Medicare Tax computed?

Form 8959, Additional Medicare Tax is used to calculate the tax amount. The tax then flows to Schedule 2 of the 1040. The amount over the income threshold is what the taxpayer pays 0.9% on. If the taxpayer is self-employed and has a loss, they will not pay the additional Medicare tax on that amount.

For self-employed taxpayers, it is their responsibility to make payments of the additional Medicare tax with their estimated tax payments. If they have wage income, they can adjust their withholding to account for that.

You can check out America’s Favorite EA YouTube page for a series on how to fill out your W-4 here: Tax Withholding

Employers are responsible for withholding the additional Medicare tax from wages or railroad retirement compensation if they pay the employee more than $200,000 in a calendar year. It does not matter what the filing status of the employee is. The employer does not have an obligation to match the amount that is withheld for the additional Medicare tax.

Expats pay additional Medicare tax, too

U.S. citizens who live abroad have to pay the additional Medicare tax if their income exceeds the threshold. They are not exempt, even if they are eligible for the foreign income exclusion. This also applies to nonresident aliens.

Need Tax Help Now?

If you need answers to your tax debt questions, book a consultation with Timalyn via her Bowens Tax Solutions website. Click this link to book a call.

Please consider sharing this episode with your friends and family. There are many people dealing with tax issues, and you may not know about it. This information might be helpful to someone who really needs it.

As we conclude Episode 71, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, YouTube, and many other podcast platforms.

Remember, Timalyn Bowens is America’s Favorite EA, and she’s here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today’s episode.

For more information about tax relief options or filing your taxes, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback or suggestions for an upcoming episode topic, please submit them here: https://www.americasfavoriteea.com/co....

Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.