Medicare Tax Calculations Over $200,000.00
Calculations for an Employee With Full Medicare Pickup
Determine whether the employee has full or partial pickup.
Determine the withholding threshold ($200,000.00).
Determine the Total YTD (the calculated YTD + this payroll's Applicable Gross).
YTD applicable gross (including pickup) + applicable gross on the pay report
Determine the employer withholding amount.
Determine if employee is already over the threshold or if this pay will put them over - or not over.
If the payroll forces the employee to exceed the threshold, determine the amount of applicable gross that over threshold.
Calculate employer pickup percentage from tables.
Calculate the employer pickup under the threshold.
Calculate the employer pickup over the threshold (the extra .9% (0.009) of Medicare over $200,000.00).
Inflate the under amounts.
Inflate the over amounts.
Calculate the inflated amount = Inflated under + Inflated over.
Calculate the payroll item applicable gross = Inflated amount.
Calculate the pickup amount = Inflated amount under x Employer pickup percent under + Inflated amount over x Employer pickup percent over.
Set pay item values for updated amounts.
Calculations for an Employee Without Medicare Pickup
Determine the withholding threshold ($200,000.00).
Determine the Total YTD (the calculated YTD + this payroll's Applicable Gross).
Determine if employee is already over the threshold or if this pay will put them over - or not over.
If the payroll forces the employee to exceed the threshold, determine the amount of applicable gross that over threshold.
Calculate the additional Medicare amount. Additional Medicare amount = Applicable gross over $200,000 x the extra .9% (0.009).
The system determines if it should do the threshold amounts based on the non-inflated gross.
Example of an Employee's pay taking them over the $200,000
1. Start with the YTD applicable gross from the employee’s Medicare item (before payroll that took employee over the $200,000)
$78,009.92
2. Calculate the Medicare adjusted gross for the employee.
(pay report total gross – total amount withheld for annuities of type Section 125 non wages – total amount withheld for Health Savings Account)
$148,554.23 – 22.85 – 24.90 – 252.72 - 26.18 – 5.30 – 62.50 NOTE – these subtracted amounts are all section 125 non wages annuity amounts withheld on the pay report
=$148,159.78
3. Calculate the employer pickup percent.
(employer rate/100) – 0.0145
.029 (2.9 / 100) – 0.0145 = 0.0145
4. Calculate inflated current pay applicable gross.
(current pay applicable gross from step 2) / (1 – employer pickup percent from step 3)
$148,159.78 / .9855 (1 - .0145) = $150,339.71
5. Calculate the total YTD applicable gross.
(YTD applicable gross from step 1) + (inflated current pay app gross from step 4)
$78,009.92 + 150,339.71 = $228,349.63
6. Inflate the amount over the additional withholding threshold of $200,000.
a. Calculate (total YTD applicable gross from step 5) – 200,000
$228,349.63 – 200,000.00 = $28,349.63
b. Calculate (amount from step 6a) * (1 - employer pickup % from step 3)
$28,349.63 * .9855 (1 – 0.0145) = $27,938.56
c. Calculate (amount from step 6b) / (1 - employer pickup % from step 3 - .009)
$27,938.56 / .9765 (1 – 0.0145 – 0.009) = $28,610.92
7. Determine the amount of inflated current pay that is under the $200,000 threshold.
$200,000 – YTD applicable gross from step 1
$200,000.00 – 78,009.92 = $121,990.08
8. Calculate total inflated.
(Inflated amount over from step 6c) + (inflated amount under from step 7)
$28,610.92 + 121,990.08 = $150,601.00
9. Calculate Pickup amount.
(inflated current pay under from step 7 * pickup percent from step 3) + (inflated current pay over from step 6c * (pickup percent from step 3 + additional withholding percentage of 0.009))
(121,990.08 * 0.0145) + (28,610.92 * .0235 (0.0145 + 0.009))
$1,768.86 + $672.36 = 2,441.22
10. Calculate normal employer withholding.
(total inflated amount from step 8) * employer rate of 0.0145
$150,601.00 * 0.0145 = $2,183.71
Employee's Earnings Register
11. Calculate total employer amount shown on pay report.
$ 2,441.22 + 2,183.71 = $4,624.93 on the pay report
Payroll Item YTD Applicable Gross (including pickup) + Applicable Gross on the pay report
$48,668.40 + $155,420.69 = $204,089.09
2. Applicable Gross over $200,000
$204,089.09 - $200,000 = $4,089.09
3. Applicable Gross under $200,000
$200,000 – $48,668.40 = $151,331.60
4. Employer Pickup Percentage
.029 (2.9 / 100) - 0.0145 = 0.0145
Employer Pickup Percent Under Threshold
0.0145
Employer Pickup Percent Over Threshold
0.0145 + 0.009 = 0.0235
5. Employer Inflated Percent Under Threshold
1 - 0.0145 = 0.9855
Employer Inflated Percent Over Threshold
1 - 0.0235 = 0.9765
6. Inflated Amount Under Threshold
$151,331.60 / 0.9855 = $153,558.19
7. Inflated Amount Over Threshold
$4,089.09 / 0.9765 = $4,187.50
8. Inflated Amount
$153,558.19 + $4,187.50 = $157,745.69
9. Pickup (shown as employer pickup on earnings register)
$2,226.59 ($153,558.19 * 0.0145) + $98.41 ($4,187.50 * 0.0235) = $2,325.00
10. Pay report employer amount (includes pickup amount)
$2,325.00 + $2,287.31 ($157,745.69 * 0.0145) = $4,612.31
Example of an Employee with Full Medicare Pickup Calculation for W2 totals
The $200,000.00 threshold does not get met until the uninflated gross reaches $200,000.00, at which point the inflated gross would be:
$200,000.00 / 0.9855 = $202,942.67
Total YTD Medicare (Medicare Tax Payroll Item) Applicable Gross = $213,095.92 - $202,942.67 = $10,153.25 (the amount over the threshold)
$202,942.67 x 0.0145 = $2,942.67 for Employee and Employer Share
$10,153.25 x 0.0145 = $147.22 for Employer Share over the threshold
$10,153.25 x 0.0235 (.0145 + .009) = $238.60 for Employee Share over the threshold
$2,942.67 + $147.22 = $3,089.89 for Total Employer Share
$2,942.67 + $238.60 = $3,181.27 for Total Employee Share
Since the employee has full Medicare pickup (the employer is paying both the employee and employer share):
Total Employer Amount is $3,089.89 + $3,181.27 = $6,271.16
Taxable Employer Pickup is the total Employee Amount of $3,181.27
The W2 report shows $3,181.28 for the Employee Amount, all of which is Employer Pickup (off by 1 penny due to rounding)
The employee gets taxed more on the wages over $200,000.00, but the employer does not.
W2 Report:
Line 5D) QTD Medicare Taxable Wages Subject To Additional Withholding Calculations
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