How should I know who makes other income?

[cronewitch]

Section 1411 increases the Medicare Hospital Insurance (HI) portion of the payroll tax. This provision will increase the employee’s portion from 1.45 percent to 2.35 percent for families making more than $250,000 a year (and for individuals making more than $200,000). Combined with the employer’s portion, the total rate will be 3.8 percent on every dollar of income over $250,000 when the tax hike takes effect in 2013.
Section 1411 also imposes a new payroll tax on investment. This tax provision applies the new higher 3.8 percent Medicare tax to investment income—including capital gains, dividends, rents, and royalties—and is scheduled to become effective in 2013. Together, the Medicare tax hikes will raise $210 billion between 2013 and 2019.

I pay payroll for corporate officers some of whom make pretty much money. How do they expect bookkeepers in companies to know who has other income, working spouses etc?

Our software upgraded today to have a place to put it on the W2 but I don't know families total incomes or investment income.

One person earned about 240K so far this year but I don't know if his wife works or he has investment income. Even if he has investment income he may not get 1099s before I do W2s so how can I withhold the money?

Another widower makes almost 200K but unless he tells me now much his taxable investment income is I don't have any way of knowing. If he sells some investment properties for say 500K does the company have to pay Medicare on that income too? What if he sells his house?

If a single person earning a lower income sells investments would they even know to report the income to the payroll clerk?

We have hundreds of employees and have no idea who has a working spouse other than people we happen to know if they ever told us. If we employee the lower earning spouse we might not have any idea what the couple earn together or if they are legally married.

Seems like a major invasion of privacy having to pry into personal financed unrelated to the job.

[BeenThere...DoneThat...]

...be happy you're front of the store on this... just imagine the audits...

[mwcpa]

the withholding requirement for an employer is as follows, per IRS.gov

"Will Additional Medicare Tax be withheld from an individual's wages?
An employer must withhold Additional Medicare Tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer. An individual may owe more than the amount withheld by the employer, depending on the individual’s filing status, wages, compensation, and self-employment income. In that case, the individual should make estimated tax payments and/or request additional income tax withholding using Form W-4, Employee's Withholding Allowance Certificate."

"When must an employer withhold Additional Medicare Tax?
The statute requires an employer to withhold Additional Medicare Tax on wages it pays to an employee in excess of $200,000 in a calendar year, beginning January 1, 2013. An employer has this withholding obligation even though an employee may not be liable for Additional Medicare Tax because, for example, the employee’s wages together with that of his or her spouse do not exceed the $250,000 threshold for joint return filers. Any withheld Additional Medicare Tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040)."

"I have two employees who are married to each other. Each earns $150,000, so I know that their combined wages will exceed the threshold applicable to married couples that file jointly. Do I need to withhold Additional Medicare tax?
No. An employer should not combine wages it pays to two employees to determine whether to withhold Additional Medicare Tax. An employer is required to withhold Additional Medicare Tax only when it pays wages in excess of $200,000 in a calendar year to an employee."

So, if an employee at any one job will make 200K or more than the employer is required to withhold the extra medicare.... there is no requirements as alluded to above to ask an employee how much they make outside of the job...

[The Captain]

Crone - Mwcpa has it right. Also want to add that any extra taxes owed (if any) will come through on their individual tax return once it is completed. Kinda the reverse of the FICA limits if you work for two employers during the year and exceed the cap. The second employer is not required to reduce your withholding, the employee just gets additional amounts refunded when they file their return.

[rangerj]

Consider providing all employees with a NOTICE that they can either adjust their withholding, or make estimated tax payments, if they meet the standards. You can also attach a copy of the IRS notice of these changes, or an IRS Publication on the matter. Go to irs.gov and see if IRS has issued a Publication on the changes. I'll repeat the above, and that is that YOU are NOT required to delve into the employees other sources of income, or otherwise into their personal lives.

[cronewitch]

Thank you so much, I was dreading this one, now it is easy. Only three people might make 200K next year they got bonuses of 127K, 117K and 86K and only one was already over the FICA max so only two will hit 200K for 2012 so maybe three is 2013 when the new law starts. The two highest will put 23K into the 401K next year I already told them I am increasing for them 500 from this year.

I try to tell them what they should to so they don't get in trouble. One just turned 70 this month so I told him to take a RMD in 2013 not to wait until the following April so he doesn't have two in one year. I will try to keep him informed about all these rules because with salary, bonus, SS and RMD his income might be too much. A first world problem.

[mwcpa]

"One just turned 70 this month so I told him to take a RMD in 2013 not to wait until the following April so he doesn't have two in one year"

That may not be required....

if they are not 5% owners of the company....(see the last part of the quote)... www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions#13

"Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires"

"The two highest will put 23K into the 401K next year I already told them I am increasing for them 500 from this year".... be careful, this is their decision, not yours.....they should all be seeking council of a qualified tax professional....deferral is not always the best, many things need to come into play beyond the current tax savings...