Trump payroll tax deferral could mean double tax in 2021

Trump payroll tax deferral could mean double tax in 2021
(Staff)

The Internal Revenue Service issued formal guidance Friday for President Donald Trump’s move to defer payroll taxes as a way to help working Americans deal with the Coronavirus outbreak, as the details showed tax collections would simply be delayed into early 2021, meaning workers would see more money this fall - and then less in their paychecks next year.


“We told you Trump’s economic orders were bad gimmicks,” said Rep. Don Beyer (D-VA), as Democrats ridiculed the idea of suspending payroll taxes this fall, only to double them in the early 2021.

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“It’s one of the stupidest policies I’ve ever heard of,” Beyer tweeted on Friday night.


The details were issued Friday evening by the Trump Administration, almost three weeks after President Trump had issued his executive action on virus relief.

The details of the tax guidance allows businesses to not withhold payroll taxes for people making less than $104,000 a year starting on September 1 until December 31.


But those taxes would still have to be paid - along with the regular payroll taxes - at some point between January 1 and April 30, 2021.


“The guidance allows employers to defer withholding and paying the employee’s portion of the Social Security payroll tax if the employee’s wages are below a certain amount,” the Treasury Department said in a statement.


A review of the plan by the U.S. Chamber of Commerce found workers who see their withholding changed - in order to follow the President’s tax referral - would have to cough up as much as $2,232 in a deferred tax bill in early 2021.

This study from the U.S. Chamber of Commerce shows how much money the President's payroll tax deferral could funnel to workers in the fall - but also shows the extra tax bill workers would owe in early 2021.
This study from the U.S. Chamber of Commerce shows how much money the President's payroll tax deferral could funnel to workers in the fall - but also shows the extra tax bill workers would owe in early 2021.

“It is unfair to American workers to make a decision that would force a big tax bill on them next year and unworkable to implement a system where employees make the decision,” the Chamber study concluded, arguing ‘many employers will likely decline to implement a deferral, choosing instead to continue to withhold and remit to the government the payroll taxes required by law.’

Ironically, while many private businesses are not required to follow the payroll tax withholding changes, many federal government workers could see the extra money in their paychecks, as the Trump Administration has signaled it will follow the President’s executive action.

Those same federal workers would then experience a double payroll tax starting on January 1, 2021.