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Financial Planning / Tax Strategies


Subject:  Re: Investment Income Surtax Date:  12/2/2012  5:41 PM
Author:  ptheland Number:  117047 of 127613

Let's work on reading comprehension. Quoting the IRS again:

If you anticipate that you will owe Additional Medicare Tax but will not satisfy the liability through Additional Medicare Tax withholding

My explanation:

You are going to owe the Medicare tax AND your employer is not withholding it for you. That's the situation you brought up earlier - two spouses, each earning $150k. Neither will have the extra tax withheld, so the payment of that tax is going to have to happen some other way.

Back to the IRS:

and did not request additional income tax withholding using Form W-4,

That is not saying to make estimated tax payments. It's implying that you could ask your employer to withhold additional income tax. You do that by filling out a W-4 to ask for the additional withholding. As a bit of an aside, you accomplish that by claiming fewer withholding allowances OR by asking for an additional dollar amount of withholding per paycheck.

you may need to make estimated tax payments.

It broken up a bit now, but if you don't ask for the withholding from your employer, only then would you need to think about estimated tax payments.

I'm not sure how additional Federal Income Tax withholding helps with the Medicare Tax unless there is a provision to apply any overage to the Medicare tax

There is.

-which will probably mean another form.

That's one possibility. The other is a worksheet in the instructions. In either case, it will be something that accompanies your income tax return and will require one or two additional lines on your income tax return. It won't be a form that's filed separately.

If you use software (or a paid preparer) there will be almost no additional work for you beyond checking the results. Turbo Tax and its brethren will ask you for all of your W-2 information, just like they do now. That information includes the amount of Medicare tax withheld. With that plus the other information needed to prepare your tax return, the software (or preparer) has everything it/he/she needs to figure up the correct Medicare tax.

This really isn't as hard as you're trying to make it. In the end, money is money. The IRS won't care what you called it when it was paid in, they let you net all of this out and come up with a single combined under or over payment of your combined tax liabilities.

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