Effective Date:
Medicare Wages
An employer is required to
withhold only on “qualifying wages”, which are wages as defined in Internal
Revenue Code Section 3121(a), generally the Medicare Wage Box of the
Form W-2.
·
Medicare Exempt Employees - are subject to the requirements for “qualifying
wages” in the Medicare Wage Box of the Form W-2 even though that box will
remain blank.
·
Cafeteria Plans - Internal Revenue Code Section 125 wages are not included in the
definition of Medicare wages and do not need to be deducted from the
Medicare Wage Box.
·
401(k), 457 and Supplemental Unemployment Compensation
Benefits -These Items should all be
included in the Medicare Wage Box and are subject to withholding requirements.
·
Nonqualified Deferred Compensation Plan - Income from nonqualified plans is included in the
definition of “qualifying wages” at the time the income is deferred and is
subject to withholding requirements.
·
Stock Options -
Income from the exercise of stock options is included in the definition of
“qualifying wages” and is subject to withholding requirements.
·
Disqualifying Disposition of an Incentive Stock Option
- Employer is not required to
withhold, but the income is considered “qualifying wages” and the recipient is
liable for the tax.
Note: As an employer, if the Medicare Wage Box is not the largest wage figure on the W-2 form a written explanation will be required.
Questions:
Contact us at (419)885-8940 or www.cityofsylvania.com/tax