Employers will now have the privilege of collecting additional Medicare taxes in 2013. As part of the increase in taxes for those deemed to be the wealthy there will be an increase in Medicare tax rates (luckily for business owners they do not have to match this fee) by 0.9% on wages over $200,000 for single filers, $250,000 for joint filers and $125,000 for spouses who file separately.
Since employers don’t know and probably don’t care what each worker’s filing status is, the IRS has new instructions for firms on how to address this issue. They must start withholding the extra 0.9% on wages over $200,000. When the workers file their individual returns, they will make up any underwithholding or claim a credit for any overwithholding on their personal taxes.
However, since this unearned income Medicare contribution tax rate is a tax imposed on individuals, and so no deduction is allowed for self-employed persons for this additional Medicare tax.
But, employers may be subject to penalties and interest for not withholding the additional Medicare tax. So they are forced to comply.