Self-employed client paid himself a salary. He withheld Additional Medicare tax on his salary. Line 24 of form 8959 is not transferring to line 16 of 2018 1040.

[KimDole]

Self-employed client paid himself a salary.  He withheld Additional Medicare tax on his salary in error.  Line 24 of form 8959 for the Additional Medicare tax withheld is showing the correct amount, but is not transferring to line 16 of 2018 1040, and the 8959 form is not showing in the forms in use.  How do I get the amount to transfer to the 1040 without having to override, and therefore not allow e-filing?

[IRonMaN]

Self employed like a sub S shareholder or self employed like a schedule C?

[Just-Lisa-Now-]

Since there is no wage limit for Medicare Tax withheld, Im not sure how you think he withheld too much.

[KimDole]

Self-employed - Schedule C.  He only paid himself a salary of $24,000, but did not understand the Additional Medicare Tax thresholds, so he withheld and paid the additional Medicare tax on his pay.  It is not the Medicare tax, it is the Additional Medicare Tax that is the issue.  He should be able to claim the additional tax withheld on his 1040.  The 8959 form is calculating the amount to be credited, but the ProSeries software is not transferring the amount to the correct line on the 1040 (and the 8959 form is not showing in the "forms in use" in the client's return).

[Camp1040]

Self employed Sch. C sole proprietor should not be issuing himself a W-2. He is not an employee he "is" the business. He would take a draw if business profits are sufficient. That is why IRMN ask for clarification.

[KimDole]

Yes, thank you, everyone.  I have explained to him that he does not need to pay himself a salary, so he will not be doing so in the future, but in the meantime, we need to rectify the 2018 error, and get him the credit for overpaid tax.

[Camp1040]

Do you mean he calculated additional medicare on earned income, the 0.9% surcharge? As Just Lisa said their is no wage limit on medicare. The surcharge would kick in at over $250,000 in wages for single person.

[garman22]

Yes, there is no payroll on Sch C for owners. As I saw you state he did this by error. Did he issue a W-2 for himself? Did he file his payroll reports for this "salary"? You are stating he withheld too much re: medicare. So, if you look at the W-2, does his medicare total $348? If its higher than that is what he over withheld. This assumes I understand what you speak of.

[IRonMaN]

The rectification is to amend the payroll tax returns for the year and back off his wages.  He shouldn't have a W-2 for the year.

[Just-Lisa-Now-]

I think Camp1040 hit the nail on the head....he didn't over withhold, hes paying additional on his earned income over the 250K mark

[TaxGuyBill]

"we need to rectify the 2018 error"

As others have said, the way to "rectify" the error is to amend the payroll forms and W-2 to $0.  That will fix everything.  Nothing else will 'fix' the fact that he can't be on payroll.

[garman22 · Accepted solution]

Additional Medicare tax is in re: to higher income earners. If taxpayer withheld too much medicare tax, that would be done via 941-X, I believe. I dont deal too much with payroll reports so....maybe someone will chime in here if I am mistaken. 

[abctax55]

"He should be able to claim the additional tax withheld on his 1040."

Ignoring the fact that issuing the W-2 in the first place is COMPLETELY wrong....if there's is a SS or Medicare withholding error on one legitimately issued W-2, the incorrect withholding must be refunded by the employer.  It isn't claime on the F 1040.

[dd4vols]

you will need to do a Form W-2c, and W-3c to correct his wages back to -0-.  then you will need to amend all the Quarterly 941s, State Unemployment Forms, Form 940 if he was included in those reports.  Based on the fact that he didn't know he couldn't get a W-2 as a sole proprietor, he may or may not have even included himself on any of those reports.  You can not put his W-2 AND any information from it, on his form 1040. He should not have a W-2.