Why is additional Medicare tax amount being added to my tax liability?

[annjmarriott]

I'm using software to file my taxes. In 2019 my wages were over $200,000, so the software filed Form 8959 for me. What I don't understand is why the amount on line 24 from Form 8959 is added to the tax section of my 1040, meaning that it's added to the tax I'm responsible for paying. On Form 8959, line 19, the amount that was entered here is $5165. This is what I paid toward Medicare tax. Next the value on line 21 was calculated by multiplying my wages by .0145. It's less than $5165. On line 22, they subtracted line 21 from 19, resulting in $868. But since I paid more than what was calculated, I'm not sure why the difference is added to my total owed tax amount on my 1040. It seems to my that my employer took out the right amount. Can someone please explain? Thanks.

[DawnC]

Beginning with the 2013 tax year, you have to file Form 8959 if the Medicare wages or RRTA reported exceed $200,000 for single filers or $250,000 for joint filers.  It is an additional .9% on top of the .0145 that your employer already took out on your W-2, box 6 amount.  

The Additional Medicare Tax only applies to the portion of your employment, self-employment and railroad retirement earnings that exceed the income thresholds for your filing status. You can find these thresholds in the instructions for Form 8959.

For tax year 2019, for example, if you are married and filing jointly, the tax only applies to income that exceeds $250,000 in combined earnings. On the other hand, if you were married filing separately, you could end up owing more tax, because the threshold is only $125,000.

Details of the calculation - which is correct in your case - What Is Form 8959: Additional Medicare Tax

The Additional Medicare Tax is charged separately from, and in addition to, the Medicare taxes you likely pay on most of your earnings. The tax applies to wages from employment, self-employment income and railroad retirement income, but if you are receiving W-2 income, the tax will most likely be withheld from your wages. Either way, anyone subject to the tax is required to file Form 8959 with their annual income tax filing.

[annjmarriott]

Ok, the thing is, it appears that my employer already took out the additional tax I owe:

1) For the first $200,000, I paid $2,900 (1.45%)

2) For the rest of my wages over that ($96,409), I paid $2,265.61 (2.35% which is 1.45% + the extra .9%)
3) Total Medicare taxes I paid: $5,165.61. This matches Box 6 on my W2.

So I'm not sure why I'm now liable for an extra $868 per Form 8959. $868 is .9% of my excess wages over $200,000. But like I mentioned, it appears that my employer already withheld the extra .9% (See item #2 I listed above.)

[SusanY1 · Accepted solution]

The Form 8595, like the other forms in the tax return, is designed to reconcile the taxes.  The tax due is calculated on this form, and you receive credit for payment in the form of the withholding shown on your W-2.

[annjmarriott]

Thank you. I had just dug deeper into the numbers and confirmed what you said - even though the extra .9% was added to my tax liability, the same amount was also added to the total tax that I paid. So looks like they cancel each other out.