This form is used to calculate and report the Additional Medicare Tax owed by certain individuals. This is an extra tax imposed on earned income above a certain threshold to help fund Medicare.
Here are some key points about Form 8959:
- Purpose of the tax: The Additional Medicare Tax was introduced as part of the Affordable Care Act (ACA) and is aimed at higher-income individuals.
- Income thresholds: For most individuals, the Additional Medicare Tax applies if your wages, self-employment income, or railroad retirement (Tier 1) compensation exceed $200,000 for single filers or $250,000 for married couples filing jointly. Different thresholds may apply if you are married and filing separately.
- Tax calculation: The tax rate for the Additional Medicare Tax is 0.9% of the earned income above the threshold. Form 8959 is used to calculate your Additional Medicare Tax liability based on your total wages, self-employment income, and other compensation subject to Medicare tax.
- Reporting requirements: Form 8959 is used to report the Additional Medicare Tax on your individual income tax return (Form 1040). If you’re an employee, the Additional Medicare Tax may have been withheld from your wages by your employer. You would report the withheld amount on Form 8959 and reconcile it with the total tax liability on your tax return.
- Employer responsibility: Employers are responsible for withholding the Additional Medicare Tax from wages and compensation that exceed the applicable threshold. However, your employer's withholding may not fully cover your tax liability, especially if you have multiple jobs or other sources of income. In such cases, you may need to make additional estimated tax payments or adjust your withholding.