Medicare
Calculate Medicare taxes for employees and understand exemptions and reporting requirements.
Overview
Medicare is a tax that is paid by both the employee and the employer. Medicare when combined with social security is known as FICA. However, within Check reports medicare will always be broken out under the name "Medicare". Employers must withhold medicare taxes from employees' wages and contribute an equal amount. The amount calculated is 1.45% of taxable wages. Medicare does not have a wage base so it will be collected continuously.
However, once an employee reaches $200,000.00 in taxable wages within a calendar year, the employee portion of medicare will increase to 2.35% while the employer will continue to contribute at 1.45%. This additional 0.9% is known as "Medicare Additional".
Calculation
Example Medicare calculations.
Scenario | Calculation | Amount |
Ben earns $3,000 in taxable wages. What is the employee portion of Medicare due? | $3,000 X 1.45% | $43.50 |
Diane earns $225,000 in taxable wages annually and will be subject to additional medicare tax of 0.9% for wages over $200,000. What is Diane’s projected employee portion of Medicare due? | $225,000 Medicare Taxable Wage Base X 1.45% = $3,262.50
$25,000 Excess Medicare Subject to Additional X 0.9% = $225 | $3262.50 + $225 = $3487.50 Total Medicare & Additional Medicare |
FAQs
What if my customer says they have an employee exempt from Medicare?
If a customer has an employee with a valid reason for Medicare exemption, please create a support ticket and Check can mark the employee exempt. Medicare tax is usually exempted with Social Security. Be sure to check with the customer to see if both taxes should be exempt.
Does Medicare appear on the W-2?
Yes. Medicare will be reported on the W-2 in box 5 (Medicare wages) and box 6 (Medicare tax withheld). Additional Medicare is not broken out on the W-2, so will be included in the same boxes listed above.
Why is Medicare listed twice on the payroll journal?
Check breaks out the employee and the employer portion of Medicare on the payroll journal. The tax is listed once for the employee with the applicable amount and once for the employer with the applicable amount.
Recording
Last updated on May 31, 2024