The following questions and answers provide employers and payroll service providers information that will help them as they prepare to implement the Additional Medicare Tax which goes into effect in 2013. The Additional Medicare Tax applies to individuals’ wages, other compensation, and self-employment income over certain thresholds; employers are responsible for withholding the tax on wages and other compensation in certain circumstances. The IRS has prepared these questions and answers to assist employers and payroll service providers in adapting systems and processes that may be impacted.

BASIC FAQs

1. When does Additional Medicare Tax start? Additional Medicare Tax applies to wages and compensation above a threshold amount received after December 31, 2012 and to self-employment income above a threshold amount received in taxable years beginning after December 31, 2012.
2. What is the rate of Additional Medicare Tax? The rate is 0.9 percent.
3. When are individuals liable for Additional Medicare Tax? An individual is liable for Additional Medicare Tax if the individual’s wages, compensation, or self-employment income (together with that of his or her spouse if filing a joint return) exceed the threshold amount for the individual’s filing status:
   

   Filing Status	Threshold Amount
   Married filing jointly	$250,000
   Married filing separately	$125,000
   Single	$200,000
   Head of household (with qualifying person)	$200,000
   Qualifying widow(er) with dependent child	$200,000

4. What wages are subject to Additional Medicare Tax? All wages that are currently subject to Medicare Tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual’s filing status. 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 of Publication 15, (Circular E), Employer’s Tax Guide.
5. What Railroad Retirement Tax Act (RRTA) compensation is subject to Additional Medicare Tax? All RRTA compensation that is currently subject to Medicare Tax is subject to additional Medicare Tax if it is paid in excess of the applicable threshold for an individual’s filing status. All FAQs that discuss the application of the Additional Medicare Tax to wages also apply to RRTA compensation, unless otherwise indicated.
6. Are nonresident aliens and U.S. citizens living abroad subject to Additional Medicare Tax? There are no special rules for nonresident aliens and U.S. citizens living abroad for purposes of this provision. Wages, other compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold.
7. Additional Medicare Tax goes into effect for taxable years beginning after December 31, 2012; however, the proposed regulations (REG-130074-11) are not effective until after the notice and comment period has ended and final regulations have been published in the Federal Register. How will this affect Additional Medicare Tax requirements for employers, employees, or self-employed? Additional Medicare Tax applies to wages, compensation, and self-employment income received in tax years beginning after December 31, 2012. Taxpayers must comply with the law as of that date. With regard to specific matters discussed in the proposed regulations, taxpayers may rely on the proposed regulations for tax periods beginning before the date that the final regulations are published in the Federal Register. If any requirements change in the final regulations, taxpayers will only be responsible for complying with the new requirements from the date of their publication.