Tax Tip of the Week | No. 469 | Medicare Costs Set to Rise for the Wealthy (ANOTHER Sneak Attack)

Tax Tip of the Week | July 18, 2018 | No. 469 | Medicare Costs Set to Rise for the Wealthy (ANOTHER Sneak Attack)

The federal government is becoming sneakier and sneakier about getting the wealthy to pay an even greater share of Medicare costs. Many of these “sneaky” taxes already exist on your income tax return. These include phase-outs of this and that, various floors and ceilings, tax bracket triggers, the alternative minimum tax, the net investment income tax, the additional Medicare tax, and so forth and so on.Beginning in 2019, individuals with incomes of $500,000 or more and couples with earnings of more than $750,000 will be required to pay 85% of the costs of Medicare Parts B and D - up from 80% now. This increase in premium is called the income-related monthly adjustment amount. In contrast, Medicare beneficiaries with incomes of less than $85,000 and less than $170,000 for couples – pay only 25% of the costs.Some of our clients (and their accountants) have been surprised by this extra Medicare tax which may be triggered by increased income levels from events such as selling their business and/or farm, etc. This extra tax is not on your income tax return but appears as additional Medicare withholding from your social security benefits. If your social security benefits are less than the Medicare tax deductions, you have the luxury of sending a check to the Social Security Administration each month and helping to reduce their current deficit.Certain appeal rights are available if a spike in your income has resulted from a “once in a lifetime” event. If such an event has occurred in your life, there is an actual form titled “Medicare Income-Related Monthly Adjustment Amount – Life Changing Event” that can be filed to help reduce your premium costs.This form may also be filed to report a decrease in your income.In addition, because the Social Security Administration bases their computations on your modified adjusted gross income, if you file an amended return that lowers your income, you should provide a copy to the SSA along with your acknowledgment receipt from the IRS, as this may help to reduce your premiums.One final option, if you disagree with the income-related monthly adjustment amount, is to file an appeal. You may file online, or in writing by completing a Request for Reconsideration, or contact your local Social Security office.Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.This week's author – Mark Bradstreet, CPA & Norman S. Hicks, CPA--until next week.