The document discusses the implications of the Additional Medicare Tax for construction companies that operate as S-corporations or partnerships. It notes that the tax requires employees earning over $200,000 to pay an additional 0.9% tax on wages. For partnerships and companies taxed as partnerships, all partners must now pay the 0.9% tax on all net taxable income earned by the company. However, income distributions from an S-corporation are not considered investment income and are not subject to the tax, though an owner-employee may owe it if other income sources exceed the limit.

1. Implications of the
Additional MedicareTax
Adam Greene, CPA

2. Implications of
theAdditional
MedicareTax
 Adam Greene, CPA, serves as an accountant with and partner in
the firm of Greene & Company, LLP, in Melville, NY. As a CPA,
Adam Greene focuses on a clientele primarily composed of
professionals in the construction industry.

3. Implications of
theAdditional
MedicareTax
 Because many construction companies operate as S-Corporations,
also known as “pass-through” entities, certain implications of
income tax law add complexity to these businesses' tax
preparation.One example of this is the recently established
Additional MedicareTax, which requires all employees earning
above a certain threshold to pay an additional 0.9 percent of these
wages.The qualification total, currently set as $200,000 for single
or head of household, encompasses primary salary as well as any
additional income.

4. Implications of
theAdditional
MedicareTax
 As a result, all partners in a construction partnership or company
taxed as a partnership are now responsible for the 0.9 percent tax
on all net taxable income that the company earns.This is not true
of pass-through income from an S-Corporation, as these
distributions are not classified as investment income. However, an
S-corporation owner-employee may be liable to the tax if income
from other sources exceeds the limit when combined.