How the New Payroll Tax Deferral Will Affect You
As Congress continues to debate the next stimulus package, President Donald Trump made headlines with four executive orders on Saturday. One of those orders, the payroll tax deferral memorandum , has left many employers puzzling over how it will work – and how it will affect their employees.
The memorandum directs the Treasury Secretary to stop collecting from employees the share of social security taxes, which is 6.2% of their income, from September 1 to December 31, 2020. Typically, companies share 12.4% on social security and 2.9% on health insurance – also called payroll taxes – with their employees by withholding an employee’s share of each paycheck.
Under the order, Trump says employees will not face fines or penalties for deferred Social Security taxes. This new order applies to people earning less than $ 104,000 a year, who may face a temporary increase in their salaries before the end of the year.
But here’s the problem: while the decree says the finance minister can explore options, including legislation, to forgive deferred taxes, there is no guarantee that this will happen. If your company complies with an order, defers your share of taxes, and Congress does not forgive the remainder, you could be hooked on money in April.
The decree still leaves unanswered questions, especially for employers who will have to make these changes to payroll tax. Many companies are awaiting further guidance from the Treasury Department before making any changes to the withholdings, the Wall Street Journal reports .
“Comments from the companies involved in the calculation of wages, show that enterprises will be difficult, if not impossible, to make the changes necessary to transfer additional money,” – says Mark Hamrick, senior economic analyst at Bankrate . He said companies know that taxes may be invoiced in the future and employees may worry about the money being deducted from their paychecks at a later date. As an employee, there isn’t much you can do now, but you can plan to start a dialogue with your employer as the new payroll tax guide rolls out. Until then, you can make sure your current hold is sufficient .