How does Turbotax calculate the Additional Medicare tax?

[PeterB-2022]

It seems turbotax calculates much higher tax due.

I have two W-2 forms (me and my spouse), by combining the total (box 6) we've already paid $11k.

Turbotax says we still owe $3500 tax, my understanding about the math of filing as married jointly case is: first $250000 is 1.45% rate, anything over that is 2.35%.

So let's say turbotax got our Total income as X, after deduction the total taxable income is Y,  so which is the actual math for Medicare Tax to be paid?

$250000 * 1.45% + (X - $250000) * 2.35%,  or 

$250000 * 1.45% + (Y - $250000) * 2.35%, or

$250000 * 1.45% + (Sum of Box 5 in all W-2, minus $250000, plus all other investment incomes after deduction) * 2.35% 

I am confused, because none of above maths result can match the amount from Turbotax, and both gave me much less tax due than turbotax, what did I miss ?

[Mike9241]

see form 8959.

shortcut

1) total of box 5 on all w-2s less $250,000. the net times 2.35%

2) add 3625 to line 1

3) total of box 6 on all w-2s

4) net additional tax subtract 3 from 2

example

total box 5  $600000

less $250000

net $350000

times 2.35%

result $8225

add $3625

result $11850

total box 6 $8700

$11850-8700= $3150 net additional owed 

say total withheld was $10,000 so net additional owed is now $1850

then schedule 1 line 11 would be $3150 ($350,000 - excess over $250,000 - times .9%)

$1300 ($10000less $8700) will appear as additional withholding on line  25c of the 1040

[PeterB-2022]

thanks Mike,

Based on your example, it seems the net additional owed can be calculated by math below:

$250000 * 1.45% + (Sum_of_all_Box_5_on_W2 - $250000) * 2.35% - Sum_of_all_Box_6_on_W2

Which calculated that I owe only less than $1000, but turbotax somehow tells me I owe another $3k, so still there is a gap.

[JohnB5677]

TurboTax uses the IRS worksheet to do the calculation.

The Additional Medicare Tax is calculated on Form 8959.

The base number is 

• W-2 Box 5 Medicare Wages
• plus unreported tips, 
• plus Uncollected Social Security and Medicare Tax on Wages  From 8919 line 6.

The allowable limits by filling status are:

• Single, HOH or Qualified Widow  -  $200,000
• Married filling Joint  -  $250,000
• Married filling Separate   -   $125,000

Subtract the allowable limit from the base number

This will yield the income subject to the additional tax.

The additional tax rate is 0.9%.  So multiply by .009 .

This will yield the amount of additional tax.

The screenshot below comes from the TurboTax worksheets.

       

Please contact us again with any additional questions or to provide some additional details.

[PeterB-2022]

Thanks John,

I think Turbotax is correct, just isn't clear, until I dig into the Form 8959.

Turbotax explains to me like this:

"You made Total payments of $XXX for 2023, which included W-2 withholdings of $YYY and other withholdings of $ZZZ."

I just realized that turbotax included "Withholding Reconciliation" on form 8959 line 24 (which is $ZZZ above), which is what I've over paid (by multiplying my total income with the base tax rate of 1.45%, vs box 6 of my W-2),  then turbotax explicitly calculate again of my Additional Medicare care tax expected to pay (the amount above $250000 for married filing jointly, multiplying by 0.9%), so actually it factored into the amount I already paid from all my W-2 and was trying to reassess additional tax part, which is correct then.