FICA (HI) Medicare Tax
DPS calculates FICA (HI) Medicare tax based on the employee's gross wages.
How DPS Calculates Tax
To calculate an employee's Medicare tax, DPS does the following:
- Subtracts any 125/Cafeteria Plan contributions from the employee's gross wages.
- Multiplies the resulting amount by 1.45%. There is no maximum wages amount.
The Medicare tax on employee wages greater than $200,000 is 2.9%.
Employer FICA amounts are calculated in each payroll run and posted as part of a combined FICA liability, but are not stored as a separately reportable value.
DPS now takes a flat withholding percentage of the taxable wages for the employer FICA-HI when the withholding is set to System and is Active. This employer liability is not annualized. As a result, there will be a rounding difference between the payroll deductions and the 941 liability for the employer liability. When the FICA-HI withholding is not set to System or is inactivated, no employer portion is posted. The 941 report will always reflect the 6.2% liability owed, regardless of withholding method.