President Trump issued an official statement to defer the taxes for federal employees from Sept. 1 through the end of the year. Trump addressed the imperative to put more money in the pockets of American workers while the COVID-19 pandemic continues to severely damage the U.S. economy. The actual implementation of the president’s plan is still unsure, as business associations across the country have repeatedly made clear they would not enforce or acknowledge it.
Typically, employers are required to withhold the taxes their employees owe for Social Security and Medicare from their paycheck. Trump’s directive intends to defer those withholdings. This would give federal employees larger paychecks, for a limited amount of time. The Agriculture Department’s National Finance Center released a notice stating this was their policy moving forward, and that it will be introduced to the federal workforce.
The NFC’s notice, applies to anyone making less than $104,000 annually, or $4,000 per pay period. It is up to the Treasury Department to issue guidance to implement the order and to find a way to remove the obligations for the deferred taxes. This has yet to take place.
“The executive order refers to the fact that this is a deferral of the deductions, and Treasury should look to have legislation put in place so that employees do not have to pay back these deferred amounts,” the center said. “NFC will provide additional information as it becomes available.”
President Trump signed the order after negotiations between lawmakers and the White House for a new coronavirus relief bill was not reached. The president leaned and urged for a pause on payroll taxes, but the proposal was apparently not popular with either the democrats and republicans. Without additional intervention, federal workers would face an abrupt and potentially unexpected tax bill when they file the following year.
“This payroll tax deferral does not really put money in workers’ pockets, it simply sets up the members of the federal workforce who can least afford it for a big tax bill that many will not expect”, said Rep. Don Beyer, D-Va. Beyer continued and called Trump’s order a “gimmick,” saying that the administration’s legal authority was “dubious.” He pledged to press the administration for additional aid and information.
It is important to note that the executive order to defer the 6.2% tax employees pay toward Social Security from Sept. 1 until Dec. 31. This is only a deferral — not forgiveness of the tax owed.
According to the NFC, the deferral will begin with taxes in pay period 17, and paychecks are set to go out Sept. 8.