The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Don't Forget The Double Payroll Tax Hit!
Jan 10, 2013
Many farmers are aware that the FICA rate for employees (including their employee portion, if self-employed) has gone back to the old 6.2% which is up 2% from the temporary reduced 4.2% rate for 2011 and 2012. This increase applies on wages as paid and will also apply on any self-employment income paid with the tax return.
The other tax that may get lost in the discussion is the new Medicare surtax of .9% on earned income in excess of $200,000 for single taxpayers and $250,000 if married filing joint. If the farmer is employed outside of the farm or earns a wage from their corporation, the employer will be required to start withholding this extra tax once the $200,000 level is reached, even if the employee is married. If the spouse does not work, then the couple may be entitled to a refund when they file their personal tax return if their total wages are less than $250,000.
If the farmer is self-employed, then this extra tax will be owed if they exceed the threshold amount.
This is another tax that has a marriage "penalty" built into it. For example, two single taxpayers earning $200,000 each would owe no additional Medicare tax, but if they were married, they would owe the tax on $150,000 of earnings or $1,350.