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Medicare Tax Questions

Medicare tax is the amount withheld by an employer from a paycheck that helps cover the cost of the Medicare program. The total Federal Insurance Contributions Act (FICA) is 7.65% of that 1.45% represents the contribution to Medicare in addition an employer pays a like amount for Social Security and Medicare. When a person is employed, there are a few taxes that are withheld out of a person’s pay. Not knowing where ones money is sent can cause questions to rise. Medicare tax is an important part of a person’s future as they age and many times can make a person have questions that need answers. Below are some of the most commonly asked questions answered by the Experts regarding Medicare Tax.

Are pretax health care deductions exempt from federal, state, social security, and Medicare taxes?

In most cases Health Insurance premium payments are exempt from Income tax, Social Security, and Medicare tax; a person can compare amounts in boxes 1, 3, and 5 on the w2 tax form.  

What should an employer and employee do, if the employee didn’t have enough Medicare tax withheld?

In most cases the employer us the one who owes the underpayment. Reimbursement is a matter of settlement between the employer and the employee. Assuming the employee agrees, the employer can make it up from future pay to that employee as an accounts receivable item. The following IRS publications discuss how to handle underpayments and overpayment of payroll taxes.  

What is the maximum Medicare tax that an individual is required to pay?

Typically there is no limit to the amount of Medicare tax since it is based on a percentage of a person’s wages.

What is the tax base for Medicare?

In most cases Medicate tax is 1.45% of a person’s total wages. In the United States there typically is no ceiling on this wage limit. However there is a limit on Social Security taxes.

If an employee is exempt from Medicare and Social Security taxes is it the employees responsibility to inform the employer, and can the employee get a refund from the government if both taxes were deducted by the employer?

As a general rule employers responsibilities include determining if a particular employee is exempt from Federal Insurance Contributions Act (FICA) taxes or any other specific payments are exempt from FICA, however if an employee qualifies for the exemption- that employee should inform the employer and provide supporting documentation if necessary. If FICA taxes were withheld incorrectly then that is the employer’s responsibility to correct and issue the corrected forms to its employees. It is possible for an employee to get a refund from the government, but only if a person works for two employers and total Social Security taxes were applied to wages above the limit ( in 2011 $106,800). Otherwise all refunds should be made by the employer.

Without Medicare coverage many seniors in the United States would have to do without medical attention because of the high cost of medical insurance premiums. Instead, they have been paying a small amount throughout their lives which makes it possible for a premium of $100.00 monthly to cover most individuals. The questions answered above are just a few of the many questions about Medicare taxes that are available to be answered by the Experts.
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