Payroll Tax

[Carmella]

What does Trumps Payroll Tax mean for us? Does that mean the money that would go into Medicare and Social Security (as listed as deductions on our paychecks) will be now added to our take home pay? I doubt if it is it will raise our annual income since I have lost my second job. I think we will have about the same income. I couldn't find much info on this except people's opinions. I did see it only applies to those earning less than $100,000.

Is this happening or was it just mentioned as something the President wants to do?

[justbroke]

My understanding of the executive order. The executive branch has certain constitutional powers under a Federal Disaster Declaration and the Office of the President is leveraging that authority.

What does Trumps Payroll Tax mean for us? Does that mean the money that would go into Medicare and Social Security (as listed as deductions on our paychecks) will be now added to our take home pay?

Yes. But, and the big but, is that this is only a deferral as the President lacks authority to remove the tax. While Congress has the ultimate authority to tax, the President can suspend the taxation but that suspension would come back to bite you later. With a deferral the taxes would be due once the deferral period ends.

I doubt if it is it will raise our annual income since I have lost my second job. I think we will have about the same income. I couldn't find much info on this except people's opinions. I did see it only applies to those earning less than $100,000.

It would not raise your income and since it's a deferral, it is still owed. Think of this like the moratorium on paying evictions and foreclosurs; the amount is still due, it's just that it can't be enforced during the moratorium. Unless Congress votes to make the payroll tax holiday a law, this payroll tax moratorium will come due at some point.

Is this happening or was it just mentioned as something the President wants to do?

The President already signed the executive order. I suspect, and expect, that party politics will come into play and that one side will attempt to sue the President on the grounds that the executive branch exceeded its constitutional authority. My read is that the executive technically has not, politics notwithstanding.

The biggest issue is the moratorium (suspension) of paying the payroll taxes -- 7.65% FICA composed of 6.20% OASDI (social security) and 1.45% Medicare -- and how that is reconciled at the end of the year. If Congress takes no action, then many people will either have their annual IRS refunds decreased or, worse, they will have a net tax due when they file their 2020 taxes.

That's my understanding of the issue.

[sophieanne]

It will be interesting to see what happens but I expect a legal challenge. The thing I read that made me think hmmm was there may be companies who will not comply as the thought of taking the money back from employees at the end of the tax holiday could be a painful experience for employers and employees. Personally I think it was a serious attempt to get congress to stop playing politics and get the job done. I guess we’ll see what this week brings.

[Carmella]

Thanks sophieanne I hope they come to an agreement that will be better, if they want to do another stimulus that is another story. Too many politics

[newlife13]

So, when does this start? And if it's a deferral, does anyone know when it will come due? At tax filing in Apr 2021? If yes, I'm going to tax myself and save the money for my tax bill!

[sophieanne]

IF it happens, it would start September 1st. There is no detail of when it would have to paid..there are still issues that have to be clarified/decided. I’m reading many employers aren’t sure they will do this..they will do the deductions but hold them until they’re due. Too many items need to be clarified.

[shipo]

My company has indicated, for the moment at least, they are NOT inclined to implement the Trump plan.

[sophieanne]

@Shipo..I understand that..it could be an administrative and people nightmare.

[shipo]

sophieanne, agreed; my hope is Corporate America just says, "No!"

[Carmella]

Yesterday the President said there would be a Payroll Tax Holiday. To my understanding when it's "holiday" it is not to be paid back/ not deferred.

I also heard that the Obama Admin did a payroll tax holiday in the past. I have no idea about that and do not remember it happening.

[sophieanne]

Carmella - tax holiday does not mean we won’t have to pay it back. This is a deferral that may have to be paid back which is why there is so much confusion among businesses. The president says he would not ask for it to be paid back if he’s re-elected ..he can’t even say that as congress would have to approve it in the budget. He made some confusing statements about unemployment payments too.