Continuing our discussion about Health Care Reform’s new requirements, the Additional Medicare Tax increase was recently implemented and affected employees may have noticed the change in their paychecks. Effective January 1, 2013, a Medicare tax increase from 1.45% to 2.35% was applied to the paychecks of employees who are subject to the Medicare tax and whose wages meet certain criteria. The rate increase will only affect single tax filers who make in excess of $200,000 and married couples who make in excess of $250,000 and are joint tax filers (the tax increase also applies to married individuals who make in excess of $125,000 a year but who file separate taxes). While it is the employer’s responsibility to withhold this increased tax amount when applicable, an employee concerned about tax liability may request that one’s employer deduct an additional amount of income tax withholding by indicating such on a W-4 Form, a form to be submitted to the employer.
In addition to the aforementioned increase, another provision of Health Care Reform will impose an unearned income Medicare contribution of 3.8 percent on net investment income for individuals with Adjusted Gross Income above $200,000 for single filers and $250,000 for joint filers. Investment income includes interest, dividends, capital gains, annuities, royalties, rents, and income derived from passive activities. Distributions from qualified retirement plans will be exempt. The unearned income Medicare contribution will be effective starting in 2013.
For more information regarding the Additional Medicare Tax increase, please see the IRS Q & A http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax
Stay tuned! Next week our discussion will continue with more information on Health Care Reform…