Implications of the Additional Medicare Tax
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Transcript of Implications of the Additional Medicare Tax
Implications of the Additional Medicare Tax
Adam Greene, CPA
Implications of the Additional Medicare Tax
Adam Greene, CPA, serves as an accountant with and partner in the firm of Greene & Company, LLP, in Melville, NY. As a CPA, Adam Greene focuses on a clientele primarily composed of professionals in the construction industry.
Implications of the Additional Medicare Tax
Because many construction companies operate as S-Corporations, also known as “pass-through” entities, certain implications of income tax law add complexity to these businesses' tax preparation. One example of this is the recently established Additional Medicare Tax, which requires all employees earning above a certain threshold to pay an additional 0.9 percent of these wages. The qualification total, currently set as $200,000 for single or head of household, encompasses primary salary as well as any additional income.
Implications of the Additional Medicare Tax
As a result, all partners in a construction partnership or company taxed as a partnership are now responsible for the 0.9 percent tax on all net taxable income that the company earns. This is not true of pass-through income from an S-Corporation, as these distributions are not classified as investment income. However, an S-corporation owner-employee may be liable to the tax if income from other sources exceeds the limit when combined.