Proposed regulations - Additional Medicare tax 

November 30: The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-130074-11) relating to the “additional hospital insurance tax” on income above threshold amounts (referred to as the “additional Medicare tax”) that was added to the Code by the Affordable Care Act.

The proposed regulations were released this afternoon, and consist of 42 pages of guidance for employers and individuals relating to the implementation of “additional Medicare tax.” Read the proposed regulations: REG-130074-11 [PDF 145 KB]


The IRS today also released a list of frequently asked questions concerning the “additional Medicare tax.”


The proposed regulations provide guidance concerning:


  • Requirements to file a return reporting the additional Medicare tax—including requirements to withhold the additional Medicare tax on certain wages and compensation
  • An employer process for making adjustments of underpayments and overpayments of additional Medicare tax
  • Employer and employee processes for filing a claim for refund for an overpayment of additional Medicare tax

Background

The Affordable Care Act increased the employee portion of the Medicare hospital insurance (HI) tax by an additional 0.9% on wages exceeding a threshold amount.


The threshold amount is $250,000 for married couples filing a joint return; $125,000 for married individuals filing separately; and $200,000 for single filers.


The employer must withhold the additional HI tax on the portion of an employee’s wages received from the employer that exceeds $200,000, without regard to the amount of wages received by the employee’s spouse.


Unlike the employee portion of the general HI tax of 1.45%, the employee is directly liable for this additional 0.9% HI tax if it is not withheld by the employer; if not withheld, the tax must be taken into account in determining individual estimated tax liability.


The additional 0.9% HI tax also applies to the HI portion of SECA tax on self-employment income in excess of the threshold amount.


The additional Medicare tax is effective for remuneration received and tax years beginning after 2012.


The proposed regulations will be published in the Federal Register on Wednesday, December 5, 2012. Comments are due by a date that is 90 days after December 5, 2012.


A public hearing on the proposed regulations is scheduled for April 4, 2013.




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