Page 7 - Supplement to 2022 Income Tax

Recent Tax Developments*

amount of Social Security that can be withheld from an with low monthly Social Security benefits, the
employee’s 2022 wages is $9,114 ($147,000 × 6.2%). $21.60 increase in Part B premiums may exceed their
The employer must pay the same amount. Social Security COLA, but the “hold harmless” rule
Self-employed individuals figuring self-employment prevents a net reduction in benefits from happening.
tax on Schedule SE will pay Social Security tax For such individuals, the “hold harmless” rule limits
of 12.4% (both the employee and employer 6.2% the increase in their Part B premium to their Social
share) on their first $147,000 of net earnings for 2022. Security COLA, so their net monthly Social Security
To the extent self-employed individuals also have benefit (after subtracting the premium) for 2022 stays
wages, the Social Security tax applies to no more than the same as it was in 2021.
$147,000 of wages and net earnings combined. Medicare beneficiaries who directly pay their 2022
All wages are subject to the Medicare tax withholding Part B premiums because they are not receiving Social
rate of 1.45%. On Schedule SE, self-employed Security benefits, and those who enroll in Part B in
individuals pay the Medicare tax of 2.9% (employee 2022, are not eligible for the hold-harmless limitation
and employer 1.45% shares) on all net earnings from and generally will pay the standard monthly premium
self-employment. There is no ceiling for the Medicare of $170.10 in 2022. However, they, as well as other
tax, so it applies to all wages and net earnings from beneficiaries with 2020 MAGI exceeding $91,000, or
self-employment for the year. $182,000 if married filing jointly, must pay a monthly
Self-employed individuals claim 50% of the surcharge in addition to the standard premium; see the
self-employment tax figured on Schedule SE as an next paragraph for surcharge details.
above-the-line deduction on Schedule 1 of Form 1040
or 1040-SR. Part B surcharge for 2022 based on 2020 MAGI and
In addition, employees and self-employed workers filing status. Whether the premium surcharge applies
will have to pay on Form 8959 the Additional Medicare depends on your adjusted gross income plus tax-exempt
Tax of 0.9% on earnings over $200,000 if single, head interest (MAGI) for the year that is 2 years prior to
of household, or qualifying widow/widower, $250,000 the year for which the surcharge is determined. That is
if married filing jointly, or $125,000 if married filing why the potential Part B surcharge for 2022 is based
separately. These thresholds do not change annually, on your MAGI for 2020. Social Security obtains your
as the statute authorizing the tax does not provide an filing data from the IRS to determine any surcharge.
inflation adjustment. If your 2020 tax return information was not available,
Social Security used your 2019 tax return data to
determine if you owe a surcharge for 2022.
Medicare Part B and Part D Premiums for If you have been notified by Social Security that
2022 (page 648) you must pay a surcharge, but your MAGI has been

Medicare Part B premiums cover eligible physician reduced by a life-changing event, you may be able to
services, outpatient hospital services, outpatient reduce or eliminate the surcharge. For example, if Social
laboratory and diagnostic services, certain home health Security told you that you owed a surcharge for 2022
services, and durable medical equipment. For 2022, based on your 2020 MAGI but you experienced a life
the standard monthly Part B premium is $170.10, changing event that reduced your income in 2021, or
an increase of $21.60 from the standard premium your income will be reduced in 2022 because of the life-
($148.50) that applied in 2021. For most Medicare changing event, you can ask Social Security to refigure
beneficiaries, Part B premiums are deducted from your 2022 premium using your 2021 tax information
their monthly Social Security benefit, but the 5.9% or your estimated 2022 information. You can use Social
COLA (cost-of-living adjustment) in Social Security Security Form SSA-44 or you can call 1-800-772-1213
benefits for 2022 will more than cover the increase to request that Social Security base the premium on a
in Part B premiums. For some Medicare beneficiaries more recent year than the year it used.

Supplement to J.K. Lasser’s Your Income Tax 2022 | 5