The IRS provided additional guidance on the 0.9% additional Medicare payroll tax by updating two frequently asked questions (FAQs) on its webpage addressing the situation in which an employer under- or overwithholds the tax in one year and discovers the error in a subsequent year. Updated FAQs No. 56 and No. 57 say that, while the employer may not correct the error by making an interest-free adjustment, it can correct the amount of wages and tips subject to the withholding on the appropriate adjusted withholding return.
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These year-end tax planning strategies address recent tax law changes enacted to help taxpayers deal with the pandemic, such as tax credits for sick leave and family leave and new rules for retirement plan distributions, as well as techniques for putting your clients in the best possible tax position.
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From The Tax Adviser
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