Tax Day 2023 and how to get an extension from the IRS
Tax Day is on Tuesday, Apr 18, 2023. Not ready to file? Submit an electronic request to the IRS for an extension ASAP!)
The Basics of Medicare Tax
FICA combines two types of taxes: Social Security and Medicare. But what is Medicare?
If you run a business, you must withhold Federal Insurance Contributions Act (FICA) taxes from your employees’ wages. If you earn a paycheck, you’re going to see FICA listed on your pay stub. It’s the reality of payroll. But what are you really paying? FICA combines two types of taxes: Social Security (previously discussed in this blog) and Medicare.
What is Medicare?
Medicare is the federal health insurance program that aids Americans who are 65 or over, or anyone – regardless of age – who has permanent kidney failure or other debilitating disabilities.
What does it entail?
The federal government imposes a Medicare tax of 2.9% to help pay for this program. It’s imposed as a flat rate on all wages, salaries, business or farming income. Unlike the Social Security tax, there is no annual wage limit. An employer pays 1.45% of the tax while the employee pays the other 1.45%. If you’re self-employed, you will pay both halves, but can deduct half as an adjustment later on.
Additional rates
An additional tax can be levied if an individual’s Medicare wages exceed a threshold amount based on his or her filing status listed on a W-4. For example, a person filling single that exceeds the $200,000 limit will be taxed an additional 0.9%. Employers do not match. Form 8959 is used to determine the Additional Medicare Tax.
Further questions? Check out the IRS’s FAQs.
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.
