8659 / What are the consequences of an employer’s failure to withhold the additional Medicare tax that an employee is liable to pay?

There are several possible ways that an employer might fail to withhold the additional Medicare tax an employee is liable to pay. For example, this scenario might occur if each spouse individually earns wages under the mandatory $200,000 withholding amount. Therefore, if one spouse has wages of $100,000 and the other spouse has wages of $199,000, neither spouse’s wages are subject to mandatory withholding. However, because the couple’s combined wages of $299,000 exceed the $250,000 applicable threshold by $49,000, they must pay the additional Medicare tax on that amount. Thus, on Form 8959, the couple would compute the additional Medicare tax of 0.9 percent on $49,000 – reporting it on line 60 of Form 1040.¹

On the other hand, an employer obligated to withhold the additional Medicare tax on wages in excess of $200,000 may simply fail to do so. Under those circumstances, the employer remains obligated to pay the tax to the IRS unless and until the employer can prove that it was paid by the employee. However, even if the employee ultimately pays the tax, it does not relieve the employer of its liability for any interest or penalties assessed as a result of its failure to withhold the additional Medicare tax.²

---

1. Treas. Reg. § 31.3102-4(b), Example J.

2. Treas. Reg. § 31.3102-4(c).