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Increased Medicare Taxes: Are You Affected?
Posted in Tax and Finance

The American Taxpayer Relief Act of 2012 created many changes to taxes for businesses. Below, read the excerpt from “The Fiscal Cliff In Depth” explaining the higher Medicare payroll tax:

In general, wages are subject to a 2.9 percent Medicare payroll tax. Workers and employers pay 1.45 percent each. Self-employed people pay both halves of the tax (but are allowed to deduct half of this amount for income tax purposes). Under the provisions of the 2010 Patient Protection and Affordable Care Act, beginning this year, single individuals earning more than $200,000 and married couples earning more than $250,000 will be taxed at an additional 0.9 percent (2.35 percent in total) on their earnings in excess of those base amounts. Self-employed persons will now pay 3.8 percent on the excess.

An employer’s obligation to withhold the extra 0.9 percent does not kick in until an employee’s wages exceed $200,000. Joint filers with combined wages over $250,000 may find themselves in a situation where they owe additional Medicare taxes on their tax returns for 2013 and beyond.

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  • Partner

    Ross D. Cohen serves as Co-Leader of the Federal Tax Team and concentrates his practice in the areas of tax and business law, focusing on federal tax transactional and planning issues of partnerships, joint ventures, limited ...

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