Money

New Withholding Obligation for Employers

The Medicare tax on earned income increases this year for individuals earning more than $200,000 and married couples earning more than $250,000. The tax on earnings above these thresholds will increase from 1.45% to 2.35%. This tax increase will also apply to self-employment income exceeding the threshold amounts.

Employers are required to withhold the additional tax from wages exceeding $200,000, regardless of the individual’s filing status. They are not required to inform employees when they begin the additional withholding, nor are they required to match the additional withholding.

Employers who don’t withhold the additional Medicare tax required this year may be subject to penalties in addition to the tax, according to an IRS official. If employees pay the additional Medicare tax at the end of the year, the employer may only be required to pay the penalties.