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Last modified on 9/23/2015 12:22 PM by User.

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Extra .9% Medicare Tax for Pay over $200,000.00

From Publication 15 (Circular E) 2014

Reminders: Additional Medicare Tax withholding. In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.


For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15. For more information on Additional Medicare Tax, visit IRS.gov and enter “Additional Medicare Tax” in the search box.

For employees over the $200,000 in wages/salary

STEP 1:

·       Task 1 Attendance entry & editing for a normal pay.

·       Task 2 Calculate the payroll. 

·       Look at the P/R-PAY EDIT LIST. 

o      Notate the amount taken out of the employees pay for this payroll for MEDI & FWT. 

·       Calculate the extra .9% medicare amount manually for any pay over $200,000.00. 

·       Go back into Task 1 Attendance entry & editing, sub-task 2 Change. Bring up this employee.  Go to field 14 Add FWT$.  Put in the amount manually calculated as the .9% extra medicare amount.

·       Go back to Task 2 Calculate the payroll again.

·       Look at the P/R-PAY EDIT LIST.

o      The MEDI amount taken out of the employees pay should be the same.

o      The FWT amount taken out of the employees pay should have the extra amount for the .9%.

·       Task 3 Process the payroll, finish processing the payroll as normal.

 

STEP 2:

·       Go to Task 18 Employee check history, Sub-task 2 Change.  Bring up the employee # & check date. 

o      Go to field 17 Medicare: change this amount; add the amount of the .9%.  For example if the amount already in field 17 Medicare is $72.50 & the extra .9% is $45.00; the $45.00 would be added to the $72.50; field 17 Medicare would be changed to $117.50.

o      Go to field 18 Federal wth: change this amount; subtract the amount of the .9%.  For example if the amount already in field 18 Federal wth is $345.00; change this amount to $300.00. 

§       Field 17 Medicare you are adding the extra amount for the .9% & field 18 Federal wth you are subtracting the extra amount for the .9%. 

§       Now the correct amount will be in the correct box on the employee’s W2.

 

STEP 3:

§       Go to Task 17 Employee master, sub-task 2 Change, bring up the employee who has the extra .9% medicare taken out of the pay.  Go to the second screen.  Change field 48 medicare, field 49 fwt, field 66 YTD medicare & field 67 YTD fwt..  These amounts print on the employee check/direct deposit stub.

 

STEP 4:

When printing P/R Task 10 Tax reports/forms, Sub-task 1 Quarterly 941 / Monthly tax summary PRHSUM the medicare amount owed will be incorrect.  This report takes the Employee check history, medicarewages and multiplies by 2.9%.  This report won’t include the extra .9% which the employee paid.   You have to add the extra .9% to the line that says AMOUNT OF TAX, under the MEDICARE column.