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Withholding or Estimated Tax Adjustments

The year is half over; therefore, now is the time to contact your upper-income clients and recommend adjustments to estimated tax or withholding allowances to take into account the additional 0.9% Medicare tax that applies for the first time this year. It is important to remember that the additional tax not covered by withholding constitutes part of the total tax in determining the underpayment interest and penalties. Beginning January 1, 2013, the Additional Medicare Tax applies to an individual’s Medicare wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the taxpayer’s filing status.

Featured in TAXPRO Weekly - July 3, 2013

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