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IRS Provides Guidance on the New 0.9 Percent Medicare Tax

Two new surtaxes are kicking in on January 1, 2013 for some taxpayers. These taxes have nothing to do with the expiring tax breaks involved in the “fiscal cliff.” The first is a 3.8 percent Medicare tax on net investment income. The second is an additional 0.9 percent Medicare tax on wages and self-employment income. It’s possible for a taxpayer to be subject to both taxes (although not on the same type of income). This article explains how the new 0.9 percent Medicare tax works.

IRS Provides Guidance on the New 0.9 Percent Medicare Tax
The IRS recently issued much-anticipated guidance on the new 0.9 percent Medicare tax on wages and self-employment income. The new tax, which will only affect upper-income individuals, takes effect on January 1, 2013.

Basics on the New Tax

Before 2013, the Medicare tax on salary and net self-employment (SE) income was a flat 2.9 percent.

If you are an employee, 1.45 percent was withheld from your paychecks, and the other 1.45 percent was paid by your employer.
If you are self-employed, you paid the whole 2.9 percent Medicare tax yourself as part of the self-employment (SE) tax.

Things have changed. The healthcare legislation (passed in 2010) added an extra 0.9 percent Medicare tax on:

Salary and/or SE income above $200,000 for unmarried individuals.
Combined salary and/or net SE income above $250,000 for married joint-filing couples.
Salary and/or net SE income above $125,000 for married individuals who file separately.

Impact on Employees: If you are a higher-income employee, your employer must withhold the new 0.9 percent Medicare tax from your paychecks, starting in 2013. That will result in a maximum Medicare tax wage withholding rate of 2.35 percent (1.45 percent plus 0.9 percent) for 2013 and beyond. The maximum wage withholding rate for Social Security and Medicare taxes combined will be 8.55 percent (6.2 percent for Social Security plus 2.35 percent for Medicare) for 2013 and beyond.

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Healthcare Law: Federal Guidance and Thoughts about Employers Dropping Coverage

Federal government agencies continue to release guidance about how employers must comply with the Patient Protection and Affordable Care Act. At the same time, employers remain confused about compliance. Many are wondering whether it will be beneficial to drop coverage for employees once the “individual mandate” becomes effective in 2014. This article discusses the issue and explains recently issued healthcare reform guidance.

Healthcare Law: Federal Guidance and Thoughts about Employers Dropping Coverage

Thoughts on Employers Dropping Coverage and Paying the Penalty

Employers across the country are wondering what will happen after the Patient Protection and Affordable Care Act’s “individual mandate” is in effect. Some small business owners are so concerned that they are reluctant to expand until they know what consequences the law will bring. To add to the confusion, employers are hearing that it might be less expensive to pay the law’s penalty fee instead of extending health coverage to employees.

On the surface, after looking at two numbers, it’s understandable why it might look like a good idea to drop coverage:

Annual premiums for employer-sponsored family health coverage reached $15,745 this year, according to a recent survey from the Kaiser Family Foundation/Health Research & Educational Trust.
After 2014, if an employer has 50 or more workers, the fine for not offering coverage is $2,000 annually per qualified worker (although the first 30 employees do not count).

Under the law, most Americans must have healthcare insurance by 2014, or pay a penalty tax for not having it. Starting in 2014, employers with 50 or more full-time equivalent employees that do not currently offer health insurance will be charged a penalty if any of the full-time employees qualify for federal subsidies and receive them.

Businesses with less than 50 employees are exempt. To encourage them to provide coverage, they will be eligible for small business tax credits.

Avoiding the Accusation of Gender-Based Pay Discrimination

The subject of pay discrimination against women has gained fresh attention in the ongoing presidential election as both parties seek to woo women voters to their candidates. Pay discrimination — real or merely perceived — can create costly problems for employers, unless you are attuned to the issue and take decisive steps to avoid problems. Following are some key facts and pointers to keep you out of trouble.

Avoiding the Accusation of Gender-Based Pay Discrimination
The federal Equal Pay Act (EPA) has been on the books for almost a half a century. President Kennedy signed the legislation in 1963, but it has not wiped out unequal pay — nor accusations about it. The Equal Employment Opportunity Commission (EEOC) under President Obama has made a priority of rooting out pay discrimination, and has been receptive to investigating claims.

Pay discrimination cases under the EPA must first be filed with the EEOC, which can easily be done without a lawyer, resulting in a high volume of claims. If the local EEOC office decides an employee has a solid case, you’ll be put on notice. You can dispute the finding and wait for the plaintiff to take you to court, but attorneys generally advise against allowing it to escalate to that level. One reason is that plaintiffs’ attorneys typically won’t represent a client until the EEOC has concluded she may indeed be a victim. Plaintiffs’ attorneys are often waiting in the wings to enter the fray at this stage — raising the stakes, and defense costs. (Note: Employees often can also file complaints with state authorities.)