ObamaCare Tax Set for January 1, 2013

I am a small business owner/sole proprietor who one day hopes to achieve the $250,000 income marker that would make me considered rich. Ha. Get a good laugh on that one. 

Anyway, even if I do reach that milestone, I will immediately need to pay the government its bonus of $2,500 to fund one component of Obamacare, the Additional Hospital Insurance Tax on High-Income Taxpayers (aka the "Medicare Surtax). This of course is in addition to the $2500 or so I will already have paid. 

Like I said, I'm not close to that, but it would be nice to grow my business to that level. That employee I'd like to hire will just have to wait for their bonus - gotta pay Uncle Sam/Uncle Obama first. How pathetic.

Here's the letter I received from my payroll service provider ADP alerting me to this tax:

Dear JOE,

As a result of the Patient Protection and Affordable Care Act, effective January 1, 2013, employers will be required to withhold a 0.9% Additional Hospital Insurance Tax on High-Income Taxpayers (a.k.a., “Medicare Surtax”). 

High-Income Taxpayers are defined as those with an annual income of $200,000 for individuals, $250,000 for joint filers, and $125,000 for married individuals filing separately. The increase applies only to the employee portion of the Medicare tax, though the employer is responsible for withholding and reporting.

Employers should be mindful that the law requires an employer to withhold the Additional Medicare Tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year.

Reconciliation of over or under withholding for joint filers or married individuals filing separately, is accomplished when the employee files his/her income tax return.  An employee has the option to have additional Federal Income Tax withheld on Form W-4 in anticipation of meeting the wage threshold for the additional Medicare Surtax.*

ADP’s payroll application has been updated and your company payroll should reflect the new Medicare Surtax requirements as applicable, beginning in calendar year 2013.

For more information about the Additional Medicare Tax, you can access the following links:

     • Refer to the IRS FAQ’s at http://www.irs.gov/businesses/small/article/0,,id=258201,00.html

     • Details can also be found on the ADP website at http://www.adp.com/tools-and-resources/legislative-updates.aspx

We appreciate the opportunity to serve your payroll and tax filing needs.

Sincerely yours,

Your ADP Service Team