Under the IRS’ recently issued proposed regulations, beginning this year, many employees will pay an additional 0.9% in Medicare taxes, for a total tax rate of 2.35%. The new rate applies to unmarried employees earning more than $200,000, joint filers earning more than $250,000 and married couples filing separately who earn more than $125,000.
Reminder: Employers don’t match this additional tax.
Good news: The proposed regulations closely track FAQs the IRS issued last summer, so you don’t need to make many changes to your software to withhold this additional tax. And, since there’s no employer match, the regs follow the income tax withholding rules for adjusting over- or underwithholding of this tax. The regs also clarify the interplay between FICA and SECA. You may rely on these proposed regs until final regs are issued. (77 F.R. 72268, 12-5-12)
FICA is a head tax, so all employees are treated as single for with...(register to read more)