Employers: In 2025, the Social Security wage base is going up Certified Public Accountants Lincoln, Nebraska
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Enter the total Medicare wages Additional Medicare Tax and tips from Forms W-2. If you have multiple W-2 forms, or you and your spouse have Medicare wages reported as W-2 income, then enter the total of all W-2 entries. In Part I, taxpayers will calculate the total additional tax on employee’s wages. If you have no Medicare wages but you have self-employment income, skip to Part II.
Don’t make financial decisions blindly – consult professionals like CBIZ MHM professional services for tailored solutions aligned with your goals. If you think you might owe the surtax, use Form 8960 to calculate your liability. It’s like having a magical calculator that reveals your fate. The 7.65% combined rate for Social Security and Medicare remains unchanged for 2024.
Are you tired of dreading tax season?
Don is also liable for Additional Medicare Tax on $150,000 of self-employment income ($150,000 in self-employment income minus the reduced threshold of $0). Taxpayer’s modified adjusted gross income exceeds the threshold of $200,000 for single taxpayers by $70,000. Any federal income tax credit that may be used to offset a tax liability imposed by subtitle A of the Code may be used to offset the NII. However, if the tax credit is allowed only against the tax imposed by chapter 1 of the Code (regular income tax), those credits may not reduce the NIIT.
What triggers NIIT tax?
Employers are responsible for withholding the tax on wages and RRTA compensation in certain circumstances. While self-employed individuals can deduct the employer-equivalent portion of the Medicare tax when calculating their adjusted gross income, the Additional Medicare Tax is not deductible. This makes it crucial for self-employed taxpayers to carefully calculate their income and ensure they are paying the correct amount. For example, let’s say you are a single taxpayer who makes $150,000 in wages during the year and experienced a one-time capital gain of $90,000 from selling long-term stocks. In this case, the investment income amount above the threshold ($40,000) is subject to the 3.8% surtax. Net Investment Income Tax (NIIT), also known as unearned income Medicare contribution surtax, is an additional 3.8% tax applied to net investment income.
Employers: In 2025, the Social Security wage base is going up
- If you lose your Form W-2 or it is incorrect, ask your employer for a new one.
- Taxpayer, a single filer, has wages of $180,000 and $15,000 of dividends and capital gains.
- If you do not have RRTA income, proceed directly to Part IV.
- The 2025 Medicare tax rate is 1.45% for employees and employers.
- The Additional Medicare Tax was introduced to help fund Medicare as part of the Affordable Care Act in 2013.
This includes wages, tips, non-cash fringe benefits, and self-employment income. This tax, first introduced under the Affordable Care Act (ACA) in 2013, applies to wages, railroad retirement (RRTA) compensation, and self-employment income that surpass these limits. With the 2025 tax season approaching, it’s essential to know if this tax applies to you – and how it’s calculated. You’ll need to complete Form 8959 and include it with your annual tax return.
- Employers are responsible for withholding the tax on wages and RRTA compensation in certain circumstances.
- Kathleen and Liam are liable for Additional Medicare Tax on $20,000 of Liam’s self-employment income ($140,000 in self-employment income minus the reduced threshold amount of $120,000, as figured on line 12 of Form 8959).
- This makes it crucial for self-employed taxpayers to carefully calculate their income and ensure they are paying the correct amount.
- If you have both wages and self-employment income, the threshold amount for applying Additional Medicare Tax on the self-employment income is reduced (but not below zero) by the total amount of Medicare wages received.
- It’s about being proactive, not reactive—taking small, smart steps throughout the year to reduce your tax burden, increase your savings, and keep more of your hard-earned money working for you.
- Individuals, estates and trusts that expect to be subject to the tax in 2013 or thereafter should adjust their income tax withholding or estimated payments to account for the tax increase in order to avoid underpayment penalties.
What estates and trusts are not subject to the Net Investment Income Tax?
If you have self-employment income, you file form 8959 if the sum of your self-employment earnings and wages or the RRTA compensation you receive is more than the threshold amount for your filing status. You can use IRS Form 8960 to calculate your net investment income tax. You can also calculate it yourself by adding together all your investment income and subtracting any related fees and expenses. For taxpayers filing Form 1040-PR or Form 1040-SS, enter the total on Line 5, Part I of your respective tax forms. Enter the total RRTA wages and tips from Form W-2, Box 14. If you have multiple W-2 forms, or you and your spouse have RRTA wages reported, then enter the total of all W-2 entries.
Don, who is married and files married filing separately, has $150,000 in self-employment income and $200,000 in wages. Therefore, Don’s employer didn’t withhold Additional Medicare Tax. However, Don is liable for Additional Medicare Tax on $75,000 of wages ($200,000 in wages minus the $125,000 threshold for a married filing separately return). In addition, the $200,000 of wages reduces the self-employment income threshold to $0 ($125,000 threshold minus the $200,000 of wages).
This form helps calculate and report the additional Medicare tax liability. Carl, a single filer, has $145,000 in self-employment income and $130,000 in wages. Therefore, Carl’s employer didn’t withhold Additional Medicare Tax. However, the $130,000 of wages reduces the self-employment income threshold to $70,000 ($200,000 threshold minus the $130,000 of wages). Carl is liable for Additional Medicare Tax on $75,000 of self-employment income ($145,000 in self-employment income minus the reduced threshold of $70,000).
Your path to complete financial prosperity begins now. To master the art of tax planning and transform your financial outlook, contact The OnlyFans Accountant for a free consultation. Want to maximize deductions, track expenses like a pro, save more, and navigate tax season like a boss? Use Part V to figure the amount of Additional Medicare Tax on wages and RRTA compensation withheld by your employer.
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At what age is Social Security no longer taxed?
The Social Security portion of Old-Age, Survivors and Disability Insurance (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount. Taxpayers calculate the Additional Medicare Tax using Form 8959, which is filed alongside Form 1040 or 1040-SR. Employers will report any amount withheld on your Form W-2.