Description
This practical application requires you to compute additional Medicare tax for a high-wage earner and report the information using the applicable tax form.
Tax forms are used to report PBC and source document information on your individual income tax return (e.g. Form 1040).
Due Date
- By Saturday at 11:59 P.M., CT.
Case Information
Lionel, a single taxpayer, reported $46,175 of self-employment income on his 2018 Schedule SE, Section B, Line 6.
Lionel also received two Forms W-2 in 2018; the applicable amounts for Medicare wages and Medicare tax withheld are summarized below:
| Form W-2 Description | Form W-2 Box # | Amount |
|---|---|---|
| Employer A Medicare wages and tips | Box 5 | 119,000.00 |
| Employer A Medicare tax withheld | Box 6 | 1,725.50 |
| Employer B Medicare wages and tips | Box 5 | 70,000.00 |
| Employer B Medicare tax withheld | Box 6 | 1,015.00 |
Directions
- Prepare Form 8959 (Parts I, II, IV, V)
- Download Form 8959 - Compensation Practical Application.pdf.
- Complete Parts I, II, IV and V of Form 8959 using the case information provided above.
- Submit the completed tax form.
Explanation & Answer
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Form
8959
Department of the Treasury
Internal Revenue Service
▶ If
Additional Medicare Tax
OMB No. 1545-0074
2018
any line does not apply to you, leave it blank. See separate instructions.
▶ Attach
to Form 1040, 1040NR, 1040-PR, or 1040-SS.
▶ Go to www.irs.gov/Form8959 for instructions and the latest
information.
Name(s) shown on return
Attachment
Sequence No.
71
Your social security number
Lionel
Part I
1
2
3
4
5
6
7
Part II
8
9
10
11
12
13
15
16
17
20
21
22
23
24
189,000
5 200,000
. . . . . . . . . .
0.9% (0.009). Enter here and
. . . . . . . . . .
6
11,000
7
990
Additional Medicare Tax on Self-Employment Income
0
0
Additional Medicare Tax on Railroad Retirement Tax Act (RRTA) Compensation
16
17
Total Additional Medic...
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