The IRS has issued 2013 proposed regulations on how employers should implement the new Medicare taxes under the Affordable Care Act (ACA), also known as Obamacare. Both taxes primarily apply to high earning individuals.
0.9% FICA Tax: Beginning in 2013, the Medicare portion of FICA will increase .9% for taxpayers who earn more than $200 thousand ($250 thousand for taxpayers filing married filing jointly). The .9% tax applies only to the employee’s share of FICA. Regardless of the employee’s filing status, an employer will withhold the .9% on any wages paid over $200 thousand in a calendar year. Employees with excess withholding can take a credit against their tax liability. Employees who may owe more than the amount withheld should make estimated tax payments or request additional income tax withholding. An employer who does not meet the appropriate withholding, deposit, reporting, and payment responsibilities may be subject to applicable penalties even though not liable for the tax itself.
3.8% FICA Tax: Under the ACA, a 3.8% tax will be applied to the lesser of the a) taxpayer’s net investment income or b) the excess of modified adjusted gross income over $200 thousand ($250 thousand for married filing jointly). Net investment income is calculated as the excess of gross income from interest, dividends, annuities, royalties, rents, passive activity income and capital gains, over any deductions allowed by the IRS that are allocated to such income. Net investment income does not include, for example, tax-exempt interest, distributions from tax qualified plans, or income from the sale of a partnership or S corporation interest.
Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.