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Frequently Asked Tax Questions And Answers
Keyword: Medicare Tax
1.16 IRS Procedures: W–4 - Allowances, Excess FICA, Students, Withholding
Why are Social Security and Medicare taxes deducted from my earnings
even through I am already collecting Social Security? Can I get these taxes
back?
Generally, employee wages are subject to social security and medicare taxes
regardless of the employee's age or whether he or she is receiving social
security benefits.
References:
If I have overpaid to Social Security or Medicare, can I get that
money back?
If you worked for two or more employers, the credit for excess social security
withheld is claimed on Form 1040 (PDF) line 64.
If you file Form 1040A (PDF), include the credit
in the total of line 43 and put "Excess SST" and the amount of the credit
in the space to the left of the line. If you are filing a joint return, you
figure the credit separately for you and your spouse. For complete instructions,
refer to Credit for Excess Social Security Tax or Railroad Retirement
Tax Withheld in Chapter 38 of Publication 17, Your Federal
Income Tax .
References:
What can be done if an employer will not withhold income taxes,
social security, and Medicare from my pay?
Generally, in situations such as this, the employer is not considering
you to be an employee. Rather, you are being treated as an independent contractor
(self-employed person). If you cannot resolve this matter with your employer,
and if you feel that an employer-employee relationship exists, you should
submit a Form SS-8 (PDF), Determination of
Employee Work Status for Purposes of Federal Employment Taxes and Income Tax
Withholding. The factors used to determine if an employer-employee relationship
exists are covered in Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide.
If your status as an employee is not at issue, it may be that you are in
a category of employment whose earnings are not defined as wages under U.S.
social security law. Find out from your employer the reason that social security
and Medicare taxes are not being withheld from your pay. If you have further
questions, contact the IRS at 800-829-1040 or visit an IRS walk-in office
for assistance.
References:
- Form SS-8 (PDF) , Determination
of Employee Work Status for Purposes of Federal Employment Taxes and Income
Tax Withholding
- Publication 15-A (PDF) , Employer's
Supplemental Tax Guide
- Publication 1779 (PDF) , Independent
Contractor or Employee
I am a graduate student and serve as a teaching assistant. I would
like to know whether FICA taxes need to be withheld from my paychecks?
Students who perform services for the school, college, or university where
they are enrolled and regularly attend classes are usually not subject to
social security and Medicare taxes.
If the student works for a public school, college or university which is
subject to a section 218 agreement, the student's services are automatically
subject to social security and Medicare taxes if the state has chosen to cover
students under its section 218 agreement with the Social Security Administration.
The employer can tell you whether its students' services are subject to social
security and Medicare taxes under a section 218 agreement.
References:
- Publication 15, Circular E, Employer's Tax Guide
- Federal Regulation section 31.3121(b)(10)-1
As I understand the law, student stipends are exempt from FICA and
Medicare taxes. If my university takes these taxes out of my stipend income,
can these taxes be recovered in some way?
If you are not performing a service for the university, your stipend would
be subject to income tax only if it does not meet the qualified scholarship
rules. Please refer toPublication 970 Tax Benefits for
Education, for information on when a stipend would be a qualified scholarship,
which would not be subject to social security and Medicare taxes. If you are
performing a service for the university, your income is taxable for income
tax purposes, but would generally be exempt from social security and Medicare
taxes if you are enrolled and regularly attending classes unless you are covered
under a section 218 agreement. Refer to Publication 15, Employer's
Tax Guide.
If your employer has been withholding social security and Medicare taxes
from your stipend, the employer should refund the withheld tax. If the employer
refuses to do so, Form 843 (PDF), Claim For
Refund and Request For Abatement, can be filed to claim credit for the
incorrectly withheld tax.
References:
Is the housing allowance for a minister subject to Social Security
Tax and Medicare Tax under FICA?
The entire amount of a minister's housing allowance is subject to social
security and Medicare taxes, even though it may be excluded from taxable income
for income taxes. A minister's compensation for services as an employee, as
well as from self-employment, is subject to Self-Employment Contributions
Act (SECA) taxes, not the Federal Insurance Contributions Act (FICA). Under
SECA the self-employed person pays all the taxes while under FICA the employer
and employee each pay half of the taxes.
However, if you are a duly ordained Commissioned, or licensed minister,
or member of a religious order not under a vow of poverty, or a Christian
Science Practitioner who elected and was approved for exemption from Social
Security coverage and self-employment tax, your housing allowance would not
be subject to social security or Medicare taxes under SECA.
References:
- Publication 517, Social Security and Other Information
for the Members of the Clergy and Religious Workers
- Form 4361 (PDF), Application
for Exemption from Self-Employment Tax for Use by Ministers, Members of Religious
Orders
- Tax Topic 417, Earnings for clergy
3.5 Itemized Deductions/Standard Deductions: 5. Medical, Nursing Home, Special Care Expenses
Can social security tax and Medicare tax be deducted on Schedule
A, as medical insurance or anywhere else?
Social Security taxes and Medicare taxes imposed on employees are not deductible
as medical insurance or pursuant to any other provision.
If you are itemizing deductions on Schedule A, you may be able to deduct
Medicare A & B premiums paid out-of-pocket. These are considered medical
expenses and must be reduced by 7.5% of adjusted gross income.
For more information, refer to Publication 502, Medical Expenses;
and Tax Topic 502, Medical and Dental Expenses.
References:
4.3 Interest/Dividends/Other Types of Income: 1099–MISC, Independent Contractors, and Self-employed
The instructions for Form 1099-MISC, Box 7, say if you are not self-employed,
call the IRS for information about how to report any social security and Medicare
taxes. I need to know how do I report social security and Medicare taxes if
I received income reported on a Form 1099-MISC, but was not self-employed?
You need to use Form 4137 (PDF), Social
Security and Medicare Tax on Unreported Tip Income. Cross out the word
"Tip" and insert the word "Wages" at the top of the form and also at the top
of Schedule U, which is attached to the bottom of the form. Follow the instructions
on Form 4137 to compute your share of your social security and Medicare taxes.
Attach Form 4137 to your Form 1040. You may call us at 1 800-829-1040 if further
clarification of the procedures is necessary.
You may want to file Form SS-8 (PDF), Determination
of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
This form requests the IRS to make an official determination of whether or
not you were an employee. To make this determination, the IRS will need information
from you and your employer.
References:
- Form 4137 (PDF), Social Security and Medicare
Tax on Unreported Tip Income
- Form SS-8 (PDF), Determination of Worker
Status for Purposes of Federal Employment Taxes and Income Tax Withholding
I am self-employed. How do I report my income and how do I pay Medicare
and social security taxes?
You are a sole proprietor if you are the sole owner of a business that
is not a corporation. Report your income and expenses from your sole proprietorship
on Form 1040, Schedule C (PDF), Profit or
Loss from Business (Sole Proprietorship), or on Form 1040, Schedule C-EZ (PDF), Net Profit from Business.
If the total of your net profit from all businesses is $400 or more, you
must pay into the Social Security and Medicare systems by filing Form 1040, Schedule SE (PDF), Self-Employment Tax.
Self-Employment tax consists of the Old-Age, Survivors, and Disability Insurance
(social security) and the Hospital Insurance (Medicare) taxes. For more information
on this, refer to Publication 533, Self-Employment Tax.
The Federal tax system is based on a pay-as-you-go plan. Tax is generally
withheld from your wages or salary before you get it. However, tax is generally
not withheld from self-employment income. Thus, you may be required to make
estimated tax payments. Publication 505, Tax Withholding and Estimated
Tax, provides information on making estimated tax payments.
References:
How do you determine if a person is an employee or an independent
contractor?
The determination is complex, but is essentially made by examining the
right to control how, when, and where the person performs services. It is
not based on how the person is paid, how often the person is paid, nor whether
the person works work part-time or full-time. There is no statutory definition
of what an employee is, but from common law three basic areas have been identified:
behavioral control,
financial control, and
type of relationship.
For more information on employer-employee relationships, refer to Chapter
2 of Publication 15-A (PDF), Employer's Supplemental
Tax Guide. If you would like the IRS to determine whether services are
performed as an employee or independent contractor, you may submit Form SS-8 (PDF), Determination of Worker Status for Purposes
of Federal Employment Taxes and Income Tax Withholding.
Unless you have requested a determination by filing Form SS-8, you generally
have to report your nonemployee compensation on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship),
or Form 1040, Schedule C-EZ (PDF), Net Profit
from Business. You also need to complete Form 1040, Schedule SE (PDF), Self-Employment Tax, and pay self-employment
tax on your net earnings from self-employment, if you had net earnings from
self-employment of $400 or more. This is the method by which self-employed
persons pay into the social security and Medicare trust funds. Generally,
there are no tax withholdings on this income. Thus, you may have been subject
to the requirement to make quarterly estimated tax payments. If you did not
make timely estimated tax payments, you may be assessed a penalty for an underpayment
of estimated tax. Employees pay into the social security and Medicare trust
funds, as well as income tax withholding, through payroll deductions.
References:
I received a Form 1099-MISC with an amount in box 7, (nonemployee
compensation). What forms and schedules should be used to report income earned
as an independent contractor?
Independent contractors report their income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship),
or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net
Profit from Business (Sole Proprietorship). You should also be aware
of Form 1040, Schedule SE (PDF), Self-Employment
Tax, which must be filed if net earnings from self-employment are $400
or more. This form is used to figure your social security and Medicare tax
which is based on your net self-employment income. You may also need to file
Form 2210, Underpayment of Estimated Tax by Individuals, Estates & Trusts,
if you do not make estimated tax payments.
References:
- Form 1040, Schedule C (PDF), Profit
or Loss from Business (Sole Proprietorship)
- Form 1040, Schedule C-EZ (PDF), Net
Profit from Business
-
Instructions for Form 1040, Schedule C
- Form 1040, Schedule SE (PDF), Self-Employment
Tax
-
Instructions for Form 1040, Schedule SE
- Publication 533, Self-employment Tax
- Publication 334, Tax Guide for Small Business
- Tax information for
Business
- Form 2210 (PDF) Underpayment
of Estimated Tax
I made several thousand dollars moonlighting as an independent contractor.
What taxes do I need to pay?
You are responsible for Federal income tax and self-employment taxes on
your income as an independent contractor. Self-employment taxes are your contributions
to Social Security and Medicare. Your self-employment income and expenses
will be reported on Form 1040, Schedule C (PDF), Profit
or Loss from Business, or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business. You will also
need to use Form 1040, Schedule SE (PDF), Self-Employment
Tax, to compute and report your social security and Medicare tax, if
you had net earnings from self-employment of $400 or more. Since there is
no withholding on your self-employment income, you may need to make quarterly
estimated tax payments. This is done using a Form 1040-ES (PDF), Estimated Tax for Individuals.
References:
- Form 1040, Schedule C (PDF), Profit
or Loss from Business
- Form 1040, Schedule C-EZ (PDF), Net
Profit from Business
-
Instructions for Form 1040, Schedule C
- Publication 334, Tax Guide for Small Business
- Form 1040, Schedule SE (PDF), Self-Employment
Tax
- Form 1040-ES (PDF), Estimated
Tax for Individuals
- Tax Topic 355, Estimated Tax
- Tax Information for
Business
- Publication 505,Tax Withholding and Estimated Tax
5.1 Pensions and Annuities: General
My 1099-R forms do not show any FICA or Medicare deductions. Do
we pay FICA on retirement?
No, you do not pay social security and Medicare taxes on retirement income.
References:
12.3 Small Business/Self-Employed/Other Business : Form W–2, FICA, Medicare, Tips, Employee Benefits
Does a household employer have to pay social security and Medicare for all
household employees if only one employee makes more than $1,400 in the year?
No. The employer only has to pay social security and Medicare tax for the employee(s)
who receive $1,400 or more in wages for the year. If the amount paid to any employee
in a calendar year is less than $1,400, no social security or Medicare tax is owed
for that employee. If social security and Medicare tax must be paid, the employee's
portion of the social security and Medicare tax should be withheld also, unless the
employer chooses to pay both the employer's share and the employee's share.
References:
- Publication 926, Household Employer's Tax Guide; Do You Need
to Pay Employment Taxes?
- Tax Topic 756, Employment Taxes for Household Employees
12.6 Small Business/Self-Employed/Other Business : Forms 941, 940, Employment Taxes
If an employee is collecting social security benefits, is the employer required
to take out social security and medicare taxes?
Yes, the employer is required to follow the withholding requirements for social
security and medicare taxes even if an employee is collecting social security benefits.
Per Chapter 9 of Publication 15, Circular E, Employer's Tax Guide, employee
wages are subject to social security and Medicare taxes regardless of the employee's
age or whether he or she is receiving social security benefits.
References:
Are housing allowances for ministers subject to social security and Medicare
taxes?
Yes, housing allowances for ministers are subject to social security and Medicare
taxes, under the Self-Employment Contributions Act. However, if you are a duly ordained,
commissioned, or licensed minister of a church, a member of a religious order not
under a vow of poverty, or a Christian Science practitioner who elected and was approved
for exemption from social security coverage and self-employment tax, your housing
allowance would not be subject to social security or Medicare taxes. Refer to Publication 517, Social Security and Other Information for Members of the Clergy and
Religious Workers, for additional information.
References:
- Publication 517, Social Security and Other Information for
Members of the Clergy and Religious Workers
- Form 4361 (PDF), Application for Exemption
from Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian
Science Practitioners
We hired a nanny to look after our baby while we work. We would like to
make it all legal, i.e. pay her social security taxes and so forth. How do we do this?
A nanny is considered a household employee. A household employer only has to pay
social security and Medicare tax for the employee(s) that receive $1,400 or more in
cash wages for the year 2003. If the amount paid is less than $1,400, no social security
or Medicare tax is owed. The taxes are 15.3% of cash wages. Your share is 7.65% and
the employee's share is 7.65%. You can choose to pay the employee's share yourself
and not withhold it. You may also be responsible for paying federal unemployment taxes.
For directions on household employees, refer to Publication 926, Household
Employer's Tax Guide.
References:
12.8 Small Business/Self-Employed/Other Business : Schedule C & Schedule SE
I am self-employed. How do I report my income and how do I pay Medicare
and social security taxes?
Your self-employment income is reported on Form 1040, Schedule C (PDF), Profit
or Loss from Business, or on Form 1040, Schedule C-EZ (PDF), Net
Profit from Business.
Your Medicare and social security taxes are reported on Form 1040, Schedule SE (PDF), Self-Employment Tax.
As a self-employed person, you pay your Medicare and social security taxes the
same way you pay your income taxes. If you expect to owe less than $1,000 in total
taxes, you can pay them when you file your income tax return. If you expect to owe
$1,000 or more in total taxes, you will need to make estimated tax payments. These
payments are made quarterly using Form 1040-ES (PDF), Estimated
Tax for Individuals. You will need to figure these taxes at the beginning of
the year. To learn about figuring and making estimated tax payments, please refer
to Publication 505, Tax Withholding and Estimated Tax.
References:
13.5 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - Tax Withholding
I entered the U.S. in August and I have a J-2 visa with an Employment Authorization
(work permit). Can I be considered as a U.S. resident for tax purposes under the substantial
presence test? Since my visa does not allow me to stay in this country am I subjected
to social security tax and Medicare tax?
You will be considered a U.S. resident for tax purposes if you meet the substantial
presence test for the calendar year. As an exempt individual, a J-2 visa holder will
not initially meet this test.
For purposes of the substantial presence test, certain days of physical presence
do not count, such as the days during which you were an exempt individual . Please
refer to Publication 519, U.S. Tax Guide for Aliens , for a detailed
explanation of this issue.
In general, U.S. social security and Medicare taxes apply to payments of wages
for services performed as an employee in the United States, regardless of the citizenship
or residence of either the employee or the employer. In limited situations, these
taxes apply to wages for services performed outside the United States. This exception
does not apply to a derivative visa holder.
References:
Under my visa as a temporary nonresident alien, I'm not subject to social
security and Medicare withholding. My employer withheld the taxes from my pay. What
should I do to get a refund of my social security and Medicare?
If social security tax and Medicare were withheld in error from pay received which
was not subject to the taxes, you must first contact the employer who withheld the
taxes for reimbursement. If you are unable to get a refund from the employer, file
a claim for refund with the Internal Revenue Service on Form 843 (PDF), Claim for Refund and Request for Abatement.
You must attach the following to your claim:
a copy of your Form W-2 (PDF) , Wage and Tax Statement,
to prove the amount of tax withheld;
Form I-797, INS Approval Notice, is needed if you have changed your status
from F-1 or J-1 to another status prior to filing the claim;
if your visa status changed during the tax year you should attach copies of the
pay stubs that cover the period of exemption from social security taxes;
a copy of INS Form I-94, Arrival/Departure Record, if you are still in the United
States;
a copy of your valid entry visa;
Form 8316, Information Regarding Request for Refund of Social Security Tax ,
or a signed statement stating that you have requested a refund from the employer and
have not been able to obtain one; and
a copy of Form 1040NR (PDF) , US Nonresident Alien
Income Tax Return (or Form 1040NR-EZ (PDF)), for tax
the year in question. Processing of your claim may be delayed if you submit it less
than six weeks after you filed Form 1040NR or 1040NR-EZ.
In addition to the documentation listed above foreign student visa holders should
also attach the following:
a copy of Form I-20, Certificate of Eligibility, endorsed by your student advisor
and stamped by the Bureau of Citizenship and Immigration Services; and
a copy of the Employment Authorization Document of your Optional Practical Training
(e.g., Form I-766, I-538 or 688B).
if you are an exchange visitor, attach a copy of Form IAP-66 or DS-2019 to your
claim.
File the claim, with attachments, with the IRS where the employer's returns were
filed. If you do not know where the employer's returns were filed, send your claim
to the Internal Revenue Service Center, Philadelphia, PA 19255.
For more information, refer to Publication 519, U.S. Tax Guide for Aliens .
References:
I am a U.K. resident and I need to recover withholding tax on a U.S. capital
gain. Do I need an ITIN?
To claim a refund of U.S. tax withheld you need to file Form 1040NR (PDF) , U.S. Nonresident Alien Income Tax Return . Therefore, you
need to secure an Individual Taxpayer Identification Number, or ITIN. To secure an
ITIN, you must file Form W-7 (PDF), Application for
IRS Individual Taxpayer Identification Number . For detailed information on applying
for an ITIN, go to Tax Topic 857 , Individual Taxpayer Identification Number
- W-7
References:
- Publication 515, Withholding of Tax on Nonresident Aliens and
Foreign Corporations
- Publication 519, U.S. Tax Guide for Aliens
- Publication 1915 (PDF), Understanding Your IRS Individual
Taxpayer Identification Number
- Form W-7 (PDF), Application for IRS Individual
Taxpayer Identification Number
- Tax Topic 857, Individual Taxpayer Identification Number -
Form W-7
- Form 1040NR (PDF) , U.S, Nonresident
Alien Income Tax Return
- Tax Topic 857 , Individual Taxpayer Identification Number
- Form W-7
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