Understanding Medicare Taxes: A Guide for Seniors

Medicare taxes are payroll taxes collected from employees and employers to help fund the Medicare program, which provides health insurance coverage for Americans age 65 and older, as well as those with certain disabilities.

Both employees and employers pay Medicare taxes. Employees pay 1.45% of their wages, and employers also pay 1.45%, bringing the total Medicare tax rate to 2.9%. Self-employed individuals pay both the employee and employer portion of the tax, for a total of 2.9%.

Medicare taxes help fund Medicare, but they do not cover all of the program’s costs. Other sources of funding include premiums paid by beneficiaries, general revenue from the federal government, and taxes on Social Security benefits.

There are no exemptions from Medicare taxes for most employees and employers. However, certain types of workers, such as railroad employees, have their own Medicare tax rates and rules. Additionally, some high-income earners may be subject to an additional Medicare tax of 0.9% on wages above certain thresholds.

Employers report and pay Medicare taxes along with other payroll taxes using Form 941, which is filed quarterly. Self-employed individuals report and pay Medicare taxes along with their income taxes using Schedule SE, which is filed annually.

If you fail to pay your Medicare taxes, you may be subject to penalties and interest charges. The IRS may also take legal action to collect the unpaid taxes, including garnishing your wages or placing a lien on your property.

If you overpaid your Medicare taxes, you may be able to claim a refund by filing Form 843 with the IRS. However, if you did not actually owe Medicare taxes or paid them in error, you may need to file Form 941-X or Schedule SE to correct the mistake.

The IRS provides detailed information about Medicare taxes on its website, including forms and instructions for reporting and paying the tax. You can also consult with a tax professional or financial advisor for personalized advice.