Beginning tax year 2013, a new Additional Medicare Tax (a provision of the Affordable Care Act) of 0.9 percent applies to individuals’ Medicare taxable wages, compensation, or self-employment income that exceeds certain threshold amounts based on their filing status. For more information about this tax, see the IRS Q&A for the Additional Medicare Tax.
How does this impact me?
Beginning January 1, 2013, employers are responsible for withholding the Additional Medicare Tax from Medicare taxable wages and compensation paid to an employee in excess of $200,000 in a calendar year.
In mid-December 2012, Intuit released a new Payroll Update (21301) that included support for a new payroll tax item, Medicare Employee Addl Tax.
If you pay wages in 2013 or later to employees who are subject to Medicare tax (regardless of whether you think you will ever pay any of them over $200,000), you must set up this new payroll tax item. This lets QuickBooks handle tracking, calculating, withholding, and reporting the Additional Medicare Tax appropriately and automatically so you don’t have to worry about if or when to apply it.
What do I need to do in QuickBooks?
Setting up the new payroll tax item, Medicare Employee Addl Tax, is simple and should be done before you create any paychecks in 2013:
1. Be sure you’ve downloaded the latest Payroll Update (21301 or later).
2. Open Payroll Setup and then close it in order to automatically set up the new Medicare Employee Addl Tax payroll tax item and attach it to the employee records of existing employees who are subject to Medicare.
3. Set up employee defaults so that the Medicare Employee Addl Tax payroll tax item is automatically attached when you add new employees who are subject to Medicare.
Once you set up the payroll tax item, QuickBooks will be able to report the Additional Medicare Tax if the IRS requires reporting on 2013 Forms 941, 944, 943, or W-2.
**As always, if you need assistance with implementing these changes in your software, give us a call 760-722-6839 or email us at Info@AdvantEdgeOnline.com to schedule an appointment.