TN 2 (07-02)

RM 01310.026 How We Derive the Aggregate Estimated Medicare Taxes for the Social Security Statement

A. Introduction

This section explains how the Statement system derives the estimated aggregate tax contribution amount for Medicare Health Insurance (HI) that is displayed at the bottom of page 3 of the Social Security Statement.

B. Policy

Any combination of FICA, SEI and MQGE earnings is applicable to HI taxes. Because railroad earnings are FICA earnings, they will be included with the FICA earnings in the “Your Taxed Medicare Earnings column” (See RM 01310.025B.) .The Statement 2000 system computes the HI tax on earnings up to the maximum taxable amount posted to the MEF for each given year. The final computed tax amount is rounded down to the nearest dollar.

The HI tax is not applicable in years prior to 1966. Any taxes for railroad earnings will be computed and displayed beginning with 1973.

Only FICA- and SECA-covered earnings are applicable in 1966 through 1982.

We display the estimated HI taxes paid as an aggregate amount. The system also calculates and displays a corresponding aggregate total of the estimated taxes paid by the SSN holder's employers.

C. Kinds of Tax Tables

1. FICA HI Table

The system uses this table to determine the appropriate FICA tax rate for HI:

YEAR

FICA HI TAX RATE

1937 through 1965

Not Applicable

1966

.0035

1967

.005

1968 through 1972

.006

1973

.01

1974 through 1977

.009

1978

.01

1979 through 1980

.0105

1981 through 1984

.013

1985

.0135

1986 and after

.0145

2. SECA HI Tax Table

The system uses this table to determine the appropriate SECA tax rate for HI:

YEAR

SECA HI TAX RATE

1937 through 1965

Not Applicable

1966

.0035

1967

.005

1968 through 1972

.006

1973

.01

1974 through 1977

.009

1978

.01

1979 through 1980

.0105

1981 through 1983

.013

1984

.026

1985

.027

1986 and after

.029

D. Process — HI Tax Rate Rules

The system uses the following rules to determine how the applicable HI tax rate is to be applied:

  • When only FICA earnings are posted for a year, the FICA HI tax rate is applied.

  • When only SECA earnings are posted for a year, the SECA HI tax rate is applied.

  • When both FICA and SECA earnings are posted, but no MQGE earnings are posted for a year, the FICA HI tax rate is applied up to the combined maximum taxable amount for the year.

  • When only MQGE earnings are posted for the year, the FICA HI tax rate is applied.

  • When both FICA and MQGE earnings are posted, but no SEI is posted for a year, the FICA HI tax rate is applied up to the combined maximum taxable amount.

  • When both SECA and MQGE earnings are posted, but no FICA earnings are posted for a year, AND the combined SECA/MQGE earnings total equals or exceeds the maximum taxable for the year, the HI tax is derived by applying the FICA HI tax rate to the MQGE portion of the combined total of earnings for the year up to the maximum taxable. The SECA HI tax rate must be applied to that portion of the combined maximum total that remains.

  • When both SECA and MQGE earnings are posted, but no FICA earnings are posted for a year, AND the combined SECA/MQGE earnings total is less than the maximum taxable for the year, the FICA HI tax rate must be applied to the MQGE portion of the combined total, and the SECA HI tax rate must be applied to the SECA portion of the combined total.

  • When FICA, SECA and MQGE earnings are all posted for a year, the FICA HI tax rate is applied to the combined total of FICA/SECA/MQGE earnings up to the maximum taxable amount for the year.

E. Process — Determining Estimated HI Tax Rate

1. Only FICA or SECA Posted

The system determines the estimated HI Tax Rate as follows when only FICA or SECA earnings are posted to the MEF for the year:

When the Tax Year Is...

Then the System...

1966 through 1982

  • Determines the type of earnings posted in the same manner as it is determined in RM 01310.025F.

  • Applies the applicable FICA HI tax rate to the FICA earnings for the year, as follows:

    CCYY FICA Earnings X CCYY FICA HI Tax Rate = CCYY Estimated HI Tax

  • Applies the applicable SECA HI tax rate to the SECA earnings for the year, as follows:

    CCYY SECA Earnings X CCYY SECA HI Tax Rate = CCYY Estimated HI Tax

After 1982

  • Determines the type of earnings posted in the same manner as indicated in RM 01310.025F.

  • Determines if MQGE earnings are posted by examining the MEF for such postings after 1982.

  • Applies the applicable FICA HI tax rate to the year in which FICA earnings have been determined as follows:

    CCYY FICA Earnings X CCYY FICA HI Tax Rate = CCYY Estimated HI Tax

  • Applies the applicable SECA HI tax rate to the years in which SECA earnings have been determined as follows:

    CCYY SECA Earnings X CCYY SECA HI Tax Rate = CCYY Estimated HI Tax

  • Applies the applicable FICA HI tax rate to the years in which MQGE earnings have been determined as follows:

    CCYY MQGE Earnings X CCYY FICA HI Tax Rate = CCYY Estimated HI Tax

  • Determines the estimated HI tax as indicated in RM 01310.026E.2. when combinations of FICA, SECA and MQGE earnings are posted to the MEF.

2. Combinations of FICA, SECA, and MQGE Posted

The system determines the estimated HI Tax Rate as follows when only FICA or SECA earnings are posted to the MEF for the year:

When the Tax Year Is...

Then the System Derives the Estimated HI Tax as Follows...

FICA and MQGE earnings are posted for a year (no SEI),

  • Adds CCYY FICA Earnings + CCYY MQGE Earnings,

  • Makes the result = CCYY Taxable HI Amount,

  • Compares the CCYY Taxable HI Amount to the CCYY maximum taxable earnings base, and

    If the CCYY taxable HI amount is equal or greater thanthe CCYY maximum taxable earnings base, then the CCYY maximum taxable earnings base X FICA HI tax rate is equal to the CCYY estimated HI tax, or

    If the CCYY taxable HI amount is less than the CCYY maximum taxable earnings base, then the CCYY taxable HI amount X CCYY FICA HI tax rate is equal to the CCYY estimated HI tax.

SECA and MQGE earnings are posted for a year (no FICA),

  • Adds CCYY SECA Earnings Amount + CCYY MQGE Earnings Amount,

  • Makes the result = CCYY Taxable HI Amount,

  • Compares the CCYY Taxable HI Amount to the CCYY maximum taxable earnings base, and if the CCYY taxable HI amount is equal or greater than the CCYY maximum taxable earnings base, then the system subtracts the CCYY MQGE Earnings Amount from the CCYY maximum taxable earnings base, and

    if the result is “$0,” then CCYY MQGE Earnings Amount X FICA HI tax rate = CCYY estimated HI tax, otherwise

    the result X SECA HI tax rate = estimated SECA HI tax, and

    CCYY MQGE earnings amount X FICA HI tax rate = estimated FICA HI tax, and

    estimated SECA HI tax + estimated FICA HI tax = CCYY estimated HI tax.

FICA, SECA and MQGE earnings are posted for a year,

  • Adds the CCYY FICA Earnings Amount + CCYY SECA Earnings Amount +CCYY MQGE Earnings Amount,

  • Makes the result = CCYY Taxable HI Amount,

  • Compares the CCYY Taxable HI Amount to the CCYY maximum taxable earnings base, and if the CCYY taxable HI amount is equal to or greater than the CCYY maximum earnings base, then the FICA HI Tax Rate X CCYY maximum taxable earnings base = CCYY Estimated HI Tax.

  • If the CCYY taxable HI amount is less than the CCYY maximum taxable earnings base, then the FICA HI Tax Rate X CCYY Taxable HI Amount = CCYY Estimated HI Tax.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0101310026
RM 01310.026 - How We Derive the Aggregate Estimated Medicare Taxes for the Social Security Statement - 08/09/2012
Batch run: 08/09/2012
Rev:08/09/2012