Medicare Tax - Need some help
Taxpayer works for local government and his wages are subject to Medicare but not Social Security. For several years, amounts were taken out of his W-2 pay pre-income and pre-Medicare for a medical health account (not HSA but works in a similar manner).
In 2023, it was determined that there was an issue with the plan. The benefits company (not employer) issued a Form 1099 NEC for amounts put into the account over the years. I questioned the use of a 1099 NEC and was told by the benefits company the reason it was put on the 1099 NEC was because the amount is subject to both income tax and Medicare tax but NOT Social Security tax as the employee wages paid by the local government are not subject to SS tax.
So there are a lot of questions, such as should corrected W-2s for each year involved be re-issued by the employer instead of a 1099 NEC issued by the benefits company, even though this goes back many years. But lets move past that as I don't want the thread to go there. Here is my question: is there a way in the program to report this to subject the amount to income tax and only Medicare tax? The closest I can come to is to report it as tips paid by a government but it clearly isn't tips and I think including a Form 4137 will really muddy the waters as the income would be reported as wages as well. Which would mean I would need to somehow negate the 1099NEC amount, which I am currently reporting as other income. I have also looked at Form 8919 but can't see how to get it to just compute Medicare tax without SS tax.
Any ideas would be appreciated.
