Overview

The Additional Medicare Tax was legislated as part of the Affordable Care Act, and has been in effect since 2013. Under this mandate, in addition to withholding Medicare tax at 1.45%, employers must withhold a 0.9% Additional Medicare Tax from wages paid to an employee once earnings reach $200,000 in a calendar year. Employers are required to begin withholding Additional Medicare Tax in the pay period in which employee wages reach $200,000 and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.

If you pay wages to employees who are subject to Medicare tax (no matter whether you think you will ever pay any of them over $200,000), you must set up the payroll item Medicare Employee Addl Tax in QuickBooks Desktop, if you haven't done so already.

To set up the tax, follow the three steps in the Additional Medicare Tax User Guide for QuickBooks Desktop.

Using QuickBooks Desktop 2014 R6 or later? Enhancements to QuickBooks Desktop 2014 R6 or later (with an active payroll subscription) automate the setup steps for the Medicare Employee Addl Tax payroll item. This ensures the payroll item is active for each employee at the moment their paycheck is created.

Tip:  To see which version of QuickBooks Desktop you have, press F2 on your keyboard. Your QuickBooks Desktop version and release (R) number appear at the top of the Product Information window.

We encourage you to revisit this article periodically for any updates and additional details.

Frequently Asked Questions

2001528