What is Medicare Tax? definition and meaning
Tax deducted from the wages of every legally working American that is used to pay for the Medicare program provided to individuals over the age of 65. This is typically another line item included on an employee’s paystub. At the end of year, the employer will provide the employee with a W-2 and this will include the total amount deducted from the individual’s paycheck for the Medicare tax. The tax was implemented under the Federal Insurance Contributions Act.
House GOP Health Plan Eliminates Two Medicare Taxes, Giving Very Large Tax Cuts to the Wealthy
In 2014, taxpayers with adjusted gross incomes above $1 million derived about 40 percent of their income from net capital gains, dividends, and taxable interest income; they received more than half of all income from these sources in 2014. Taxpayers with incomes above $10 million received an average of 56 percent of their income from capital gains, dividends, and taxable interest income. By contrast, these sources only made up about 3 percent of the income of people who made between $50,000 and $75,000. IRS Statistics of Income, Individual Statistical Tables by Size of Adjusted Gross Income, Table 1.4, https://www.irs.gov/uac/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income.
Federal Withholding Tax Table
Update your payroll tax rates with these useful tables from IRS Publication 15, (Circular E), Employer’s Tax Guide. The charts include federal withholding (income tax), FICA tax, Medicare tax and FUTA taxes.
ACA Repeal Would Lavish Medicare Tax Cuts on 400 Highest
Before health reform, Medicare taxes applied only to wage and salary and self-employment income, not to unearned income from wealth. For low- and moderate-income working families, which have little unearned income, this meant that Medicare taxes applied to virtually all of their income. In contrast, the wealthiest taxpayers owed no Medicare taxes on their unearned income, which represents a significant share of their income.
What is Form 8959: Additional Medicare Tax
If you had more than one type of income, such as W-2 income and self-employment income, you will have to complete all sections that apply. Once you complete Form 8959 and figure out the total Additional Medicare Tax you’re responsible for, the final section of the form subtracts the tax you paid through withholding and estimated tax payments to determine if there is any Additional Medicare Tax due — which ultimately gets reported on your 1040 form.
What is Form 8919: Uncollected Social Security and Medicare Tax on Wages
A business may hire a worker as an independent contractor, but the worker may be classified as a paid employee by the Internal Revenue Service, depending on how their position is structured. An independent contractor generally decides how and when to complete their workload, so if an employer reserves the right to control that, they’re likely an employee. A worker who uses tools and equipment owned by the employer may be considered an employee, since a contractor usually has their own equipment.