It’s hard to believe that 2013 is half over. Now is the time to start looking at your payroll tax withholdings and make sure you’re having enough withheld so you don’t end up owing a big chunk at the end of the year.
Here is a neat calculator the IRS provides to help you decide if you need to make any adjustments to your withholdings. You will need your most recent tax return and your most recent pay check stub to get the most accurate results. Click HERE to go to the calculator. Or visit http://apps.irs.gov/app/withholdingcalculator/
There are also two new Medicare surtaxes that went into effect this year in compliance with new Obama Care mandates. These changes affect those with incomes in excess of $200,000.00 ($250,000.00 if filing joint). So if you’re in this bracket, you need to make sure you’re having enough withheld.
3.8% Medicare Tax on Net Investment Income—Taxpayers who earn more than $200,000.00 ($250,000.00 if married filing jointly) face an additional 3.8% Medicare tax on the lesser of: their income in excess of $200/250,000.00, or their net investment income (interest, dividends, royalties, rents, etc.). For more information on this surtax click HERE or visit http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
The second change to Medicare tax is a .9% additional withholding on earned income over $200,000.00 ($250,000.00 if filing joint). Earned income includes wages, self-employment income, commissions, bonuses and tips, but excludes investment income. Your employer is required to withhold the additional tax if your income exceeds the 200,000.00 mark, however, they probably will not be aware of addition income you may have so it’s up to you to notify them that the additional amount needs to be withheld. To find out more about this tax click HERE or visit http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax.
Stay on top of your withholdings. While no one enjoys having all this money taken out of their paychecks, we like it even less when we have to fork over a big check come filing time.