In your paycheck, you might see some taxes. Among them, you might see FED MED/EE. Upon seeing this one, you might be wondering about it. So, what is FED MED/EE tax? Just keep reading the post until the end and it is guaranteed that you will understand about it.
Definition of FED MED/EE Tax
FED MED/EE is the abbreviation of Federal Medical/Employer-Employee. The other names of this include Federal EE – Medicare, Medicare Tax, Medicare, FICA Medicare, and Medicare 1.45%. This one is defined as a tax that funds the Medicare Health Insurance program. Apparently, each citizen of United States is able to access the Medicare health insurance program for free, including many basic services. Even though they are some parts of Medicare that should be paid by the subscribers, there are also a few services covered by the Fed MEX/EE tax, including hospitalization and emergency services.
FED MED/EE tax is part of a federal withholding tax, along with Social Security and federal income tax. Just like Social Security taxes, FED MED/EE tax is also withheld on the federal level, meaning it is not a state or country basis like some other taxes normally seen on your paycheck.
Difference between FED MED/EE and FED OASDI/EE
FED MED/EE tax is often mistaken as FED OASDI/EE tax. While these two may seem similar as they are both part of FICA, they are different. They are two separate taxes that are included in pay statements. As stated before, Fed MED/EE tax refers to Medicare tax. As for Fed OASDI/EE tax, it is Social Security tax.
One of the things that set FED MED/EE tax or Medicare tax from FED OASDI/EE tax or Social Security tax is that there is no income limit to which this tax is applied. Remember that the Medicare wages of someone are subject to FED MED/EE tax. In general, it includes earned income such as wages, tips, bonuses, allowances, commissions, vacation, and other taxable benefits.
FED MED/EE Tax Rates in 2023
In 2023, the FED MED/EE tax rate is 2.9%, which is split equally between employers and employees. Basically, the W-2 employees will need to pay 1.45% while their employer will have to pay the remaining 1.45%. As for self-employed individuals, they will have to pay the entire 2.9% as they are considered both an employee and an employer.
Should Everyone Pay the FED MED/EE Tax?
Just like the income tax, FED MED/EE tax is also cut through same way. However, it is not used when calculating the federal return of the taxpayer. For anyone who is wondering if you are required to pay the FED MED/EE tax, if you are an American taxpayer, then the answer to the question is yes, unless you offer a qualified exception.
Once again, almost every single worker who works in the United States must pay FED MED/EE tax. Based on the Federal Insurance Contributions Acts or FICA, the FED MED/EE tax will be taken from employees’ paychecks by the employers, just like FED OASDI/EE tax. The self-employed workers are required by the Self-Employed contributions Act or SECA to pay both of them as part of their self-employment tax.
Furthermore, the FED MED/EE tax, along with FED OASDI/EE tax, will be held in trust funds by the U.S. Treasury. For the FED MED/EE tax, it is kept in the Hospital Insurance Trust Fund. This one is used to pay for Medicare Part A. As for the costs of Medicare Part B, medical insurance, Medicare Part D, prescription drug coverage, they are all covered by the Supplemental Medical Insurance Trust Fund which is funded with premiums paid by several things such as beneficiaries, tax revenue, and investment earnings.
Exemptions of FED MED/EE Tax
As mentioned before, every American taxpayer must pay FED MED/EE tax, unless they offer a qualified exception. One of the examples of an exception is when both the employer and employee are members of a religion that is against the insurance that is based on their beliefs.
According to TheBalance.com, an exemption from Social Security and Medicare taxes applies to every non-immigrant student, scholar, teacher, researcher, and trainee who is temporarily present in the United States in F-1, J-1, M-1, or Q-1 status, as long as these people remain non-residents for federal income tax purposes. Aside from that, the exemption also applies to all periods in which a foreign student is in the process of “practical training” or other off-campus employment allowed by U.S. Citizenship and Immigration Services of USCIS.
If you think that you are eligible for this exception, you are suggested to discuss with an IRS agent to be guided. Apart from that, you can also talk to a tax advisor for the same purpose.
FED MED/EE Tax Refunds
In case an employee has overpaid on their FED MED/EE Tax, they are able to get a refund. In order to get a refund on their FICA taxes, the first thing that they have to do is to claim this with their employer. If the attempt fails, try to get their refund when they file their taxes with the IRS on a Form 843 (Claim Refund or Request for Abatement).
Additional FED MED/EE Tax
Everyone whose earned income (including wages, compensation, and self-employment income) surpasses particular thresholds is required to pay additional tax. Single individuals with more than $200,000 income and married couples with more than $250,000 income have to pay an additional Medicare tax rate of 0.9%. Keep in mind that it only applies to the income above their threshold limit. For instance, someone with an annual income of $225,000 will have to pay a Medicare tax of 1.45% for the first $200,000. As for the rest $25,000, it will be subject to an additional Medicare tax of 0.9%. Take a note that the surtax is deducted from the paycheck of the employee or is paid with self-employment taxes, meaning it is not paid by the employer.
Bottom Line
In conclusion, the FED MED/EE tax or Medicare tax is the type of tax that is charged to everyone who works in the United States in order to fund the Medicare system. It is charged to individuals on their paychecks, just like the FED OASDI/EE tax or Social Security tax. This year, the FED MED/EE tax is 2.9%. It is worth noting that it is split between the employer and the employee.
A bookworm and researcher especially related to law and citizenship education. I spend time every day in front of the internet and the campus library.
