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Retirement tax questions
Hello @DianeW777
Your answer seems in conflict with 1) IRS guidance, 2) Form 8959 instructions. Feel free to elaborate if you think any of the below is specifically wrong, but the case seems strong.
1) Per IRS guidance, Form 8959 is the form used to document additional Medicare tax withheld and refundable if compensation does not exceed the threshold for filing status.
Q: My wages and self-employment income or my RRTA compensation do NOT exceed the threshold for my filing status, but my employer withheld 0.9 percent from my wages; do I need to file Form 8959?
A: Yes. If your employer withheld the 0.9% Additional Medicare Tax from your wages or compensation, and you will not meet the threshold based on your filing status, then the amount that was withheld from your wages or compensation may be refundable to you. Therefore, you need to file Form 8959, Additional Medicare Tax, to document the withholding and to receive a refund of any tax that was withheld in excess of the total tax owed on your individual income tax return.
2) Part V of Form 8959 specifically documents and reconciles any additional Medicare withholding with the total Additional Medicare Tax (actual owed) from line 18 in Part IV.
-Line 18 in Part IV computes any additional 0.9% Medicare tax liability and flows to Schedule 2 line 11, and eventually to 1040 Line 23 (other tax owed)
-Line 24 in Part V computes additional 0.9% Medicare tax withheld that flows to Form 1040 line 25c
-Form 1040 line 25c documents withholding across W-2, 1099, and other forms. Without Form 8959 existing (regardless of income), line 24 does not flow to Form 1040 line 25c.
So, if someone's income is below the additional 0.9% threshold but they had the 0.9% withheld from compensation, line 18 is zero (no liability) and line 24 is positive (some 0.9% was withheld), per the form guidance the positive amount should go to 1040 line 25c and act as a credit. Turbotax is not doing this, and instead is ignoring that Form 8959 exists entirely.
"Based on the employer tax reporting form (form 941) it's not possible to over pay."
It is very possible to overpay/have Medicare over-withheld from employee compensation - I have direct evidence of this. Whatever the employer/payroll system should or should not have done re: withholding is a separate question from how the tax forms operate in reconciling this amount properly.