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Wed Sep 2, 2020, 09:20 AM

Planned Payroll Tax Deferrals Create Minefield for Feds

Last edited Wed Sep 2, 2020, 10:14 AM - Edit history (1)

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Pay & Benefits

Planned Payroll Tax Deferrals Create Minefield for Feds

If the deferment is made permanent, employees could see a lower payout in retirement; if not, employees could receive a large tax bill next year, union official says.

September 1, 2020 05:27 PM ET


The Trump administration reportedly will begin deferring payroll taxes for all eligible federal employees later this month over the objections of unions and other employee groups, who lambasted the plan as “chaotic and confusing.”

Last week, the Agriculture Department’s National Finance Center, which processes paychecks for around 600,000 employees across 160 agencies, issued a notice indicating it would implement provisions of an August presidential memorandum to defer the taxes, which fund programs like Social Security, until the end of 2020. Although the Office of Management and Budget did not respond to multiple requests for comment, the administration told Federal News Network that all federal payroll processors would act in concert to defer payroll taxes, likely between Sept. 18 and 24.

The deferrals will apply to all federal employees making less than $104,000 per year, or $4,000 per pay period. In the short term, those federal workers will see an increase in take-home pay, but absent action by Congress to forgive the debt that is effectively incurred on employees, they likely will be expected to pay that money back some time next year.


National Federation of Federal Employees National President Randy Erwin said consequences could be more dire, as IRS guidance suggests feds may have to pay penalties and interest on the deferred payroll taxes, and if they do not have to return the money, they could see smaller annuity payments when they retire. ... “Either way, the employee loses,” he said. “If the tax deferment becomes permanent, and provided it is legal, the employee could get a lower payout in retirement. If the deferment is temporary, the employee risks getting a huge tax bill plus interest and penalties early next year.”

And Ken Thomas, national president of the National Active and Retired Federal Employees Association, said he too has encouraged members not to spend the additional money that will be in their paychecks for the rest of the year. ... “I hope federal employees see this for what it is: a short-term loan that will need to be repaid in full, and not an increase in take-home pay,” Thomas said. “Unfortunately, I worry that millions of federal workers will be caught off guard by the size of their tax bill next year.”

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Reply Planned Payroll Tax Deferrals Create Minefield for Feds (Original post)
mahatmakanejeeves Sep 2 OP
beachbumbob Sep 2 #1
RazzleCat Sep 2 #2
Delmette2.0 Sep 2 #3

Response to mahatmakanejeeves (Original post)

Wed Sep 2, 2020, 09:25 AM

1. the ploy by trump to create generational voter war

So the tactic of deferring FICA taxes started yesterday and the wording is these taxes will have to be paid back starting Jan 1, 2021 is NOTHING but cheap ploy by trump/GOP to create a generational voting war between the under 55 and over 55 voters. Their belief is the younger voters will vote for trump and GOP so the FICA tax goes away permanently and SS and Medicare/SSI are permanently shutdown. AARP and their 40 MILLION members will be fully educated as well as the ads that will run by democratic superPAcs across states with significant over 55 populations. This is why we see significant leads for Biden in Arizona and going lead in Florida.

This is pure example how trump/GOP live in a bubble. They actually think that 10's of millions of senior voters who vote trump/GOP are going to cut their own throats? You think their kids want to HAVE to take MOM and Dad in and support them and PAY THEIR MEDICAL BILLS or let them die?

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Response to mahatmakanejeeves (Original post)

Wed Sep 2, 2020, 09:54 AM

2. Never thought of it in that way

I thought it was a twofer combo. Help himself, and screw a new administration.

1. Look how much money you are getting in your check thanks to my tax cut.

2. A time bomb if Biden wins, because it's not a tax cut, but a deferment so it will all be collected in 2021.

bonus it has the possibility of destroying Social Security, depending on a set of factors that I can't predict. You know who wins the election, how congress handles the reaction of employees owing the IRS for the first time etc.

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Response to mahatmakanejeeves (Original post)

Wed Sep 2, 2020, 10:19 AM

3. How will the IRS or the taxpayer know how much to identify for FICA

on the tax returns? Will the repayments REALLY go to the Social Security Trust? I don't think all the online tax return systems are prepared to add a line designated for FICA paybacks. I don't think even the paper forms could be reprinted in time.

I think all the extra repayments will go to the general fund and not SSA. Individuals will be screwed again by not having those payments credited to their Social Security account.

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