Payroll Tax Deferment: What You Need to Know
The payroll tax deferment “holiday” is meant to put more money into the pockets of Americans, but experts warn it may not be help many people are looking for.
On Tuesday September 1st, President Trumps Executive Order to defer payroll taxes went into effect.
So, what does this mean for the average persons paycheck?
The payroll deferment only applies to people making less than $2000 weekly, or $104,000 yearly after taxes.
For employers that opt to participate, payroll taxes will be withheld for the remainder of 2020.
For eligible employees, this equates to an extra 6.2% of pre-tax wages that will go into their pockets.
There is one caveat though. The money will have to paid back in the first quarter of 2021.
From January 1 to May 1 2021, the taxes would be recouped by means of doubling up on payroll taxes.
This means that in 2021, payroll taxes will double to 12.5% until the deferred taxes are paid off.
Employers have the option to opt in, or out of the program, however employers that participate are not required to give employees a choice in the matter.
The payroll tax deferment also puts an additional burden on companies.
If an employee leaves the company before 2021, or does not pay the taxes back, it is the employers responsibility to pay the taxes.
President Trump has hinted that if re-elected he would forgive repayment.
Contact your companies Human Resources department to find out if your employer is participating, or has chosen to opt out.
