Under executive order, companies in the US have the option of not withholding the 6.2% of social security tax the employee is responsible for. It is only available to employees that make less than $4,000 every two weeks, or $104,000 annually.
It is not a forgiveness of the tax, but a deferral to 2021.
So if you make $2,000 every two weeks, or $52,000 per year, then your take home pay on a bi-weekly basis is going to increase by $124 per pay period.
Then starting in 2021 for January - April, you’re going to see your net pay decrease by $248 per pay period. That’s the 6.2% payroll tax you normally would pay, plus another 6.2% to pay the tax you didn’t pay in the last 4 months in 2020.
So essentially it’s a small loan that the Federal government is advancing you for 4 months this year and then going to collect back next year.
Want it?
My company has decided that we will not participate.
Guidance is unclear from the IRS. The Company could withhold the tax deferment from your final paycheck. If for some reason the Company cannot collect the tax from the employee, then the Company is liable for its final remittance to the government.
Doesn’t apply to me now, because I don’t make any money, and it didn’t apply to me when I was working, because I made too much, but if it did, no. Given the number of jobs at risk now, who would not save it just in case? And if someone gets laid off, are they then also responsible for repaying the money on next year’s taxes - when they might have it? The spending issue is for those without jobs.
Stupid idea right now. But we know where it came from, don’t we?
I’m with the rest of the folks, this is A Bad Idea from any perspective. I suppose it might have some temporary benefit at some point for politicians, buuuut, nah brah, leave my paycheck alone thank you.
I do payroll at my business. When I first heard about this deferment, I hemmed and hawed about whether or not we should even offer it to our employees. Mainly because I don’t believe some of them will understand that it’ll have to be paid back. The one person that I think probably needs the money the most, probably understands it the least. He was one of the people that threw a fit about Obama raising payroll taxes. He’s so far Right that he won’t listen to anything non-critical of Obama. I couldn’t explain to him that Obama didn’t raise payroll taxes, he temporarily lowered them and they were going back to where they started.
In any case, a few weeks ago, assuming this would be an option I could choose to offer and assuming the payroll software would get a patch that would allow it to be different for each employee, my plan was to ask each employee what they wanted to and go from there. I mean, it’s really not my problem if they fully understand it, right? I generally make a point of not giving people tax advice.
However…
This is where the problems start. My assumption was that each employee would still accrue federal payroll taxes and, again my assumption, they’d have to pay it back with their 2020 tax return.
However, as of the last time I looked at the guidance, the employer will track how much each employee owes (the software takes care of that, no big deal), and the employer has to deduct it from their 2021 paychecks. The problem is, the employer owes the money. The way it’s currently stated, if an employee were to quit, their employer would have to pay that back out of pocket.
I have to assume that’ll get updated to say that the employee owes the money, not the employer. Not only does that not make sense, if it stays that way I think a lot of people are going to get new jobs lined up for the first of the year and leave their soon to be ex-employer to pay the bill.
And, of course, there’s no benefit for the unemployed.
I pay off my SS tax in March-ish. This won’t affect me, and it’s a stupid idea. Stimulating the economy through dribbling out weekly or biweekly pittances will have zero effect.
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This is really the thin edge of a plan to quietly defund Social Security.
If Trump & the Rs are re-elected they’ll continue the “holiday” until SS goes broke very soon.
And if Biden and the Ds are elected, they’ll need to reinstate the current tax, making an easy target for more RW talking head anger: “The first thing the socialist D’s did in office is raise taxes; quick, crash the stock market so it’ll be their fault!!!1!1!!”
For all these reasons no sane American of either party should support this nonsense. And should be loudly calling for the lie at the center to be exposed.
Not only is it a stalking horse for gutting SS, if it was made permanent, employers could look at you and say, guess what, you just got a 6.2% raise, so don’t expect much from me the next couple of years.