Ignore Any Lines Regarding the
Supplemental Medicare Surtax

The Internal Revenue Service gave an early tip to taxpayers about the repeal of the supplemental Medicare catastrophic premium, or surtax: when you file your 1989 income tax return, ignore any lines on the form that refer to the surtax.

The IRS also explained what taxpayers should do to get credit for any amounts they may have already paid.

Medicare beneficiaries will get information on how the repeal affects the filing of their 1989 tax returns in a mailing being prepared by the Health Care Financing Administration. The IRS provided tax filing information on page 4 of the notice, which more than 33 million Medicare beneficiaries will receive in late January.

The IRS said that when the 1989 Forms 1040 and 1040A were developed, lines were included to report the supplemental Medicare surtax as required by existing legislation -- line 54 on Form 1040 and line 23 on Form 1040A. The IRS also developed special forms for calculating the amount of the surtax -- Form 8808 for Form 1040 and Schedule 2 for Form 1040A.

At the time the IRS had to begin printing the tax forms packages in the fall, Congress was considering modification or repeal of the supplemental Medicare surtax. To try and avoid confusion, the IRS cautioned taxpayers in the forms instructions that pending legislation could affect the treatment of this supplemental surtax and decided not to include Form 8808 or Schedule 2 in the tax packages. In fact, the IRS did not print Form 8808 or Schedule 2, and anyone who orders them will receive a notice explaining why they are not needed.

Now that the law has been repealed, taxpayers should simply ignore the lines on their returns that call for an amount to be entered for the surtax. They can either leave the lines blank or enter a zero. Taxpayers should also ignore any references to Form 8808 or Schedule 2.

The IRS stressed that taxpayers must file a return to claim a credit or get a refund for any amounts already paid in through estimated or withheld taxes to cover the surtax. This means that taxpayers must file a return to get any payments refunded, even if they do not owe any income tax.

Taxpayers who increased their tax withholding or quarterly estimated tax payments to cover the surtax can claim a credit for those amounts under the "payment" section of their return. (On Form 1040, line 56 is for withheld tax and line 57 is for estimated tax payments. On Form 1040A, line 25a is for withheld tax.) These payments will be credited against total income tax liability and any excess will be included in the taxpayer's refund.

The IRS said that it is working closely with the American Association of Retired Persons and major tax practitioner and preparation groups, such as the American Institute of Certified Public Accountants, the National Association of Enrolled Agents and the National Society of Public Accountants. These groups have agreed to help educate their members and clients about the repeal of the surtax.

The IRS also said that the assistors who provide answers to tax questions on the IRS toll-free telephone system are prepared to answer questions about the repeal of the Medicare surtax.

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