Form 8959 | All You Need To Know

form 8959

Starting in the 2013 tax year, if your wages surpass a specific threshold, you could be subject to an additional 0.9 percent Medicare tax. The Additional Medicare Tax (Form 8959) is levied beside and separate from the Medicare taxes you will presumably pay on most of your earnings.

Wages from employment, self-employment income, and railroad retirement income are all subject to the Form 8959 tax. But if you receive W-2 income, something might withhold the tax. In either case, anyone who is subject to the tax must file Form 8959 along with their annual income tax return.

So, in this article, we will discuss what IRS Form 8959 is, Form 8959 instructions, and tax. Let’s look into it!

What is IRS Form 8959?

The additional 0.9 percent Medicare tax on earnings, self-employment, and railroad retirement income that surpasses a specified threshold is calculated using the IRS Form 8959 (Additional Medicare Tax).

For jointly filing couples, the threshold is $250,000, then for married couples filing separately, $125,000, and for everyone else, $200,000.

If your income surpasses the threshold amount for your filing status, the IRS will automatically include Form 8959 on your return.

Who Must File Form 8959?

If any of the following applies to you, then you must file form 8959.

  • On any single form W-2 (box 5) your Medicare wages and tips total more than $200,000.
  • If on any single form W-2 (box 14), your RRTA remuneration exceeds $200,000.
  • If your total Medicare tips and wages, your self-employment income, if there’s any (inclusive of Medicare tips and wages plus self-employment income of your spouse, if you’re married filing jointly), exceed your filing status threshold amount in the table below.
  • Your total RRTA tips and compensation (Form W-2, box 14) exceed the threshold amount for your filing status in the table below (including your spouse’s RRTA tips and compensation, if married and filing jointly).

Wages and tips from Form W-2, box 5; tips from Form 4137, line 6; and wages from Form 8919, line 6 make up your Medicare wages.

Schedule SE, Part I, line 6 is included in your self-employment income. Negative amounts should not be considered when filling out IRS Form 8959.

You might need to correct your Additional Medicare Tax liability (if any), if your RRTA compensation, Medicare wages, or self-employment income has been modified. Attach a corrected Form 8959 to your original or amended return for addressing Additional Medicare Tax liability.

Attach Form W-2, Wage, and Tax Statement, or Form W-2c, Corrected Wage and Tax Statement if you want to correct RRTA compensation or Medicare wages.

Threshold Amounts For Additional Medicare Tax (Form 8959 Tax)

It does not index these threshold amounts for inflation.

Filing StatusThreshold Amount
Married filing jointly$250,000
Married filing separately$125,000
Single$200,000
Head of household$200,000
Qualifying widow(er)$200,000

Amounts Subject to Form 8959 Tax

Additional Medicare Tax applies to all wages that are subject to Medicare tax to where they are greater than the threshold amount for your filing status. See the chart, Special Rules for Various Types of Services and Payments, in section 15 of Pub. 15 (Circular E), Employer’s Tax Guide, for more info about what wages are subject to Medicare tax.

Irrespective of your filing status or any income or compensation received from another employer, your employer must withhold Additional Medicare Tax on wages paid to you that is more than $200,000 for the calendar year.

All RRTA compensation that is now subject to Medicare tax is liable to Additional Medicare Tax in a way that surpasses the filing status threshold amount. And irrespective of your filing status or the wages or compensation received from another employer, a railroad employer must withhold Additional Medicare Tax on remuneration it pays you that exceeds $200,000 for the calendar year.

If your company is supposed to withhold Additional Medicare Tax, you cannot ask them to stop. If you aren’t owing Additional Medicare Tax, you can file IRS Form 8959 to claim a credit for any Additional Medicare Tax that was withheld against your total tax liability.

The threshold for Applying Additional Medicare Tax (if you have self-employment income and wages) on the self-employment income is decreased (but not less than zero) by the number of earnings subject to Additional Medicare Tax.

Read: Fire At Will: What Does it Mean At Work?

IRS Form 8959 Instructions

If you want to file Form 8959, then use the following IRS Form 8959 instructions as a guide.

Part I: Additional Medicare Tax on Medicare Wages

You can skip Part I and move to Part II if you have no Medicare wages. This also applies if you’re filing jointly with your spouse.

Line 1

Input your tips and Medicare wages from box 5 of Form W-2. But if your Form W-2 is over one, then input the entire amounts from box 5 of all Forms W-2. And if you’re filing jointly with your spouse, incorporate your spouse’s wages and tips.

Line 2

Put in the unreported tips from Form 4137 of line 6, Medicare Tax, and social security on unreported tip income. However, if you’re filing a joint return with your spouse, also incorporate the amount from line 6 of your spouse’s Form 4137.

Here’s the penalty for failing to report tips:

If you cannot report tips to your employer as supposed, you could face a penalty of 50% of the Medicare, Additional Medicare taxes, and social security owed on those tips. If you can establish that your failure to report tips to your employer was because of reasonable cause rather than deliberate neglect, you can escape this punishment.

You can do so by attaching a statement to your return explaining why you did not report them, or by responding to a notification about a penalty assessment with a statement. See Pub. 531 for more information on tip reporting.

Line 3

Input the wages from Form 8919 of line 6, Medicare Tax on wages and unresolved social security. Again, incorporate the amount from line 6 of your spouse’s Form 8919 if you’re filing a joint return with your spouse.

Line 7

Enter your Additional Medicare Tax on Medicare wages here. To get your Additional Medicare Tax, multiply line 6 by 0.9% (0.009) and write the result on this line. After that, go to Part II.

Part II: Additional Medicare Tax on Self-Employment Income

You can skip Part II and move to Part III if you do not have self-employment income. This also applies if you’re filing a joint return with your spouse.

Line 8

Form 1040, Form 1040-SR, and Form 1040-NR filers. Input your self-employment income from Schedule SE, line 6 of Part I. Put together the amounts from this line (line 8) if you have many Schedules SE.

Form 1040-SS and Form 1040-PR filers. Input the self-employment income from Part V of line 6.

Self-employment income less than $400. Don’t add any of the following amounts on line 8.

  • Amount on Schedule SE, line 6 (Part I) if it’s lower than $400. But if line 5b is $100 or greater, then incorporate that amount on line 8.
  • The amount contained on Form 1040-SS or Form 1040-PR of Part V, line 6 if it’s lower than $400 then the amount on line 5b is blank or -0-. But if line 5b is $100 or greater, then incorporate that amount on line 8.

Line 13

Enter your Additional Medicare Tax on self-employment income here. And to get your Additional Medicare Tax on self-employment income, simply multiply line 12 by 0.9% (0.009) and write the result on this line. After that, proceed to Part III.

Part III: Additional Medicare Tax on Railroad Retirement Tax Act (RRTA) Compensation

You can skip Part III and move to Part IV if you do not have RRTA income. This also applies if you’re filing a joint return with your spouse.

Line 14

This is your total Railroad Retirement Tax Act (RRTA) compensation and tips. So, enter the amount of your RRTA compensation and tips from Form (s) W-2, box 14. And if your Form W-2 is more than one, then input the total amounts of the RRTA compensation from box 14 of every Form W-2.

But if you’re filing jointly with your spouse, add your spouse’s RRTA compensation. Also, for an employee representative that is subjected to RRTA taxes, he/she must cover the entire compensation that is subject to Tier 1 Medicare Tax as reported in Form CT-2 of line 2.

Line 17

Enter your Additional Medicare Tax on RRTA compensation. And to get this, multiply line 16 by 0.9% (0.009). Then write the result here and move to Part IV.

Part IV: Total Additional Medicare Tax

Line 18

Add the amount from line 18 on line 11 of Schedule 2 (Form 1040), line 5a (Part I) of Form 1040-SS, and line 5a (Part I) of Form 1040-PR.

Part V: Withholding Reconciliation

Use Part V to calculate the amount of Additional Medicare Tax withheld by your employer from your wages and RRTA compensation.

Leave Part V blank if you (or your spouse, if you’re filing a joint return) do not have Medicare earnings or RRTA compensation.

Line 19

In box 6 of Form W-2, input the amount of Medicare tax withheld (if any). Include the amounts in box 6 of all your Forms W-2 and put the total here if you have more than one (Form W-2). Also, add your spouse’s Medicare tax withheld if you’re submitting a joint return.

Add any unpaid Medicare taxes on tips from Form W-2, box 12, code B, as well as any unpaid Medicare taxes on the taxable cost of group-term life insurance above $50,000 (for former employees) from Form W-2, box 12, code N. Include the amounts in box 12, codes B and N, of all your Forms W-2 and enter the total here if you have more than one (Form W-2).

Add these amounts (if any) from your spouse’s Form(s) W-2 if you’re submitting a joint return. But, don’t add any sums reported on Form W-2, box 12, codes B and N, for uncollected RRTA Medicare tax.

Note that: On Form W-2, box 6, both Medicare tax and Additional Medicare Tax withholding are reported simultaneously.

Line 23

In box 14 of Form W-2, input the amount of Additional Medicare Tax withheld (if any). Add up the amounts in box 14 of all your Forms W-2 and put in the total here (if you have more than one). Also, add your spouse’s Additional Medicare Tax withheld if you’re submitting a joint return.

The total Additional Medicare Tax paid, as reported on line 3, an employee representative that’s subject to RRTA taxes should include Form CT-2.

Line 24

On the line of your tax return, enter the amount from line 24.

  • If you file Form 1040, Form 1040-SR, or Form 1040-NR, then add this amount to line 25c together with your federal income tax withholding.
  • Also, if you file Form 1040-SS, add the amount to line 12 (Part I).
  • If you file Form 1040-PR, add the amount to Part I (line 12).

After completing your IRS Form 8959, attach it to Form 1040, 1040-SR, 1040-NR, 1040-SS, or 1040-PR.

Conclusion

Your wages from railroad retirement income, self-employment income, and employment income are all subject to Form 8959. However, the tax might be withheld from your wages if you’re receiving W-2 income. Therefore, if you’re subject to tax, you must file Form 8959 alongside your annual income tax filing.

FAQs

Who is subject to the Additional Medicare Tax?

If you’re a taxpayer and make more than $200,000 (as an individual), or $250,000 (as a married couple), then you’re subject to an Additional Medicare Tax of 0.9%.

At what age do you stop paying Medicare Tax?

After 65, if you do not have an earned income, then you don’t pay Medicare Taxes or Social Security.

Who pays Social Security and Medicare Taxes?

Self-employed people, employers, and employees pay Social Security and Medicare Taxes. With employees, the taxes are popularly called Federal Insurance Contributions Act (FICA).

Is Medicare automatically deducted from Social Security?

Yes. Medicare is automatically deducted from Social Security.

Do I need Form 8959?

Wages from railroad retirement income, self-employment income, and employment income are all subject to Form 8959. However, the tax will possibly be withheld from your wages if you’re receiving W-2 income.

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