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medicare tax on options is 0.9% or 3.8%?
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removeps-groups
Nov 8, 2012, 11:53:47 PM11/8/12
to
Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a profit
of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income) or
3.8% (the rate for capital gain income). I think because the 10k profit
goes on the W-2 it would be 0.9%.
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of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income) or
3.8% (the rate for capital gain income). I think because the 10k profit
goes on the W-2 it would be 0.9%.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
Phil Marti
Nov 9, 2012, 5:55:17 AM11/9/12
to
On Thursday, November 8, 2012 11:55:01 PM UTC-5, removep...@yahoo.com wrote:
> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a profit
> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income) or
> 3.8% (the rate for capital gain income). I think because the 10k profit
> goes on the W-2 it would be 0.9%.
The exercise income is compensation, not investment income, so it's subject to wage payroll taxes (FICA/Medicare).
> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a profit
> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income) or
> 3.8% (the rate for capital gain income). I think because the 10k profit
> goes on the W-2 it would be 0.9%.
Phil Marti
VITA/TCE Volunteer
Clarksburg, MD
paulthomascpa
Nov 9, 2012, 8:16:22 AM11/9/12
to
"Phil Marti" <prm2...@verizon.net> wrote
> On Thursday, November 8, 2012 11:55:01 PM UTC-5, removep...@yahoo.com
> wrote:
>
>> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a
>> profit
>> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income)
>> or
>> 3.8% (the rate for capital gain income). I think because the 10k profit
>> goes on the W-2 it would be 0.9%.
>
> The exercise income is compensation, not investment income, so it's
> subject to wage payroll taxes (FICA/Medicare).
>
We talked about this in class the other day, and unless your AGI is made up
> wrote:
>
>> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a
>> profit
>> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income)
>> or
>> 3.8% (the rate for capital gain income). I think because the 10k profit
>> goes on the W-2 it would be 0.9%.
>
> The exercise income is compensation, not investment income, so it's
> subject to wage payroll taxes (FICA/Medicare).
>
entirely of wages of one employer, how will the employer know to withhold
more in Medicare tax? Seems that based on the conversations in class, that
the employee/taxpayer will have to tell the employer "I make more than you
think, so withhold $x in additional Medicare taxes", or just let it fall to
the 1040 in March, or April, or September, or whenever the returns get
prepared.
--
Paul Thomas, CPA
www.paulthomascpa.com
Watkinsville, Georgia
Message has been deleted
Alan
Nov 9, 2012, 12:14:38 PM11/9/12
to
On 11/8/2012 9:53 PM, removeps-groups wrote:
> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a profit
> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income) or
> 3.8% (the rate for capital gain income). I think because the 10k profit
> goes on the W-2 it would be 0.9%.
>
Nothing to add to the other replies other than to point out that the
> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a profit
> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2 income) or
> 3.8% (the rate for capital gain income). I think because the 10k profit
> goes on the W-2 it would be 0.9%.
>
3.8% medicare contribution tax applies to net investment income not just
"capital gain income". In addition, it applies to the lesser of the net
investment income or the amount that AGI exceeds the threshold.
See the following for details:
http://www.baratzcpa.com/articles/medicare-contribution-tax.htm
Phil Marti
Nov 10, 2012, 6:53:29 AM11/10/12
to
On Friday, November 9, 2012 8:20:02 AM UTC-5, paulthomascpa wrote:
> We talked about this in class the other day, and unless your AGI is made up
> entirely of wages of one employer, how will the employer know to withhold
> more in Medicare tax?
Paul, I think the Medicare tax on wages/salary is the same regardless of total wages or AGI. The new tax is on investment income and is calculated on the return.
> We talked about this in class the other day, and unless your AGI is made up
> entirely of wages of one employer, how will the employer know to withhold
> more in Medicare tax?
Phil Marti
VITA/TCE Volunteer
Clarksburg, MD
Phil Marti
Nov 10, 2012, 8:34:46 AM11/10/12
to
On Saturday, November 10, 2012 6:55:02 AM UTC-5, Phil Marti wrote:
> Paul, I think the Medicare tax on wages/salary is the same regardless of total wages or AGI. The new tax is on investment income and is calculated on the return.
And apparently I thought wrong. Sorry.
> Paul, I think the Medicare tax on wages/salary is the same regardless of total wages or AGI. The new tax is on investment income and is calculated on the return.
Getting back to the issue of multiple employers (or self-employment income) that takes the taxpayer over the additional Medicare tax threshold, I imagine this will be handled on the 1040 in sort of a reverse process of the treatment of excess FICA withheld by multiple employers.
Message has been deleted
Alan
Nov 10, 2012, 12:35:16 PM11/10/12
to
On 11/10/2012 7:42 AM, D. Stussy wrote:
> "paulthomascpa" wrote in message
> news:rNmdnRdedJCHnwDN...@giganews.com...
>
> Employers won't, just like when two or more employers don't know that
> Social Security withholding exceeds the annual wage amount. I assume
> that there will be a new form to handle the additional medicare tax
> which will flow to the back side of the 1040. Expanding Schedule SE
> will just confuse people, plus the excess might not be considered an
> employment tax.
The employer will withhold the .9% based on the employee's W-4. That
means an employee could be under-withheld or over-witheld. The employee
follows the same rules that exist today for both positions. Here are
Ernst & Young's FAQs to employers. It's a pdf file.
http://goo.gl/F5mbW
> "paulthomascpa" wrote in message
> news:rNmdnRdedJCHnwDN...@giganews.com...
> "Phil Marti" <prm2...@verizon.net> wrote
>> On Thursday, November 8, 2012 11:55:01 PM UTC-5, removep...@yahoo.com
>> wrote:
>>> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a
>>> profit
>>> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2
>>> income) or
>>> 3.8% (the rate for capital gain income). I think because the 10k profit
>>> goes on the W-2 it would be 0.9%.
>>
>> The exercise income is compensation, not investment income, so it's
>> subject to wage payroll taxes (FICA/Medicare).
>
> We talked about this in class the other day, and unless your AGI is made up
> entirely of wages of one employer, how will the employer know to withhold
> more in Medicare tax? Seems that based on the conversations in class, that
> the employee/taxpayer will have to tell the employer "I make more than you
> think, so withhold $x in additional Medicare taxes", or just let it fall to
> the 1040 in March, or April, or September, or whenever the returns get
> prepared.
> ==============
>> On Thursday, November 8, 2012 11:55:01 PM UTC-5, removep...@yahoo.com
>> wrote:
>>> Suppose your AGI is 250k. In 2013 you exercise NQSO options , with a
>>> profit
>>> of say 10k. Is the Obamacare medicare tax 0.9% (the rate for W-2
>>> income) or
>>> 3.8% (the rate for capital gain income). I think because the 10k profit
>>> goes on the W-2 it would be 0.9%.
>>
>> The exercise income is compensation, not investment income, so it's
>> subject to wage payroll taxes (FICA/Medicare).
>
> We talked about this in class the other day, and unless your AGI is made up
> entirely of wages of one employer, how will the employer know to withhold
> more in Medicare tax? Seems that based on the conversations in class, that
> the employee/taxpayer will have to tell the employer "I make more than you
> think, so withhold $x in additional Medicare taxes", or just let it fall to
> the 1040 in March, or April, or September, or whenever the returns get
> prepared.
>
> Employers won't, just like when two or more employers don't know that
> Social Security withholding exceeds the annual wage amount. I assume
> that there will be a new form to handle the additional medicare tax
> which will flow to the back side of the 1040. Expanding Schedule SE
> will just confuse people, plus the excess might not be considered an
> employment tax.
The employer will withhold the .9% based on the employee's W-4. That
means an employee could be under-withheld or over-witheld. The employee
follows the same rules that exist today for both positions. Here are
Ernst & Young's FAQs to employers. It's a pdf file.
http://goo.gl/F5mbW
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