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Health Care Reform: IRS Publishes Final Rules on Additional Medicare Tax

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November 2013

The Internal Revenue Service (IRS) has issued final regulations on the Additional Medicare Tax added by the ACA which increased the employee portion of the Medicare tax for high-income employees from 1.45% to 2.35% beginning in 2013. The employer portion of the Medicare tax remained at 1.45%. Employers are required to withhold the Additional Medicare Tax from employees earning more than $200,000 (but the actual liability thresholds for employees are: $250,000 for married individuals filing jointly, $125,000 for married individuals filing separately, and $200,000 for all other individuals).

The final rules provide guidance for employers with respect to withholding of the Additional Medicare Tax from employees’ wages, filing and reporting requirements for the tax, and the process for correcting underpayments and seeking refunds for overpayments of the tax. The rules went into effect on November 29, 2013.

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