In 2013, payroll departments are to implement a key tax increase provision of the Patient Protection and Affordable Care Act. The Internal Revenue Service calls this provision the Additional Medicare Tax and it applies to individuals' wages, other compensation, and self-employment income greater than a certain amount.

The increase in the Medicare tax for high earners had its foundation as part of Barack Obama's 2008 campaign proposals. How such an additional tax could be implemented through payroll withholding methods and systems was a subject of concern. Eventually, a two-pronged increase for high-wage earners became part of health care reform legislation as a vehicle to finance many of the changes proposed for Medicare, and as such, affected the Medicare portion of FICA.

This Payroll White Paper provides a summary of IRS guidance on implementing the 2013 increase in the withholding amount for Medicare tax purposes. The report provides information for payroll departments regarding withholding changes, reporting requirements, notifications, and includes information in proposed Treasury Regulations and Questions and Answers revised by IRS on Nov. 30, 2012.