Today is the first day of the payroll tax deferral. It’s complicated, here’s what we know – CNBC

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It’s the first official day of President Trump’s payroll tax holiday, and plenty of uncertainty is swirling around employers and their workers over how it will work.

The president handed down the payroll tax deferral for employees via executive order in early August.

The holiday applies to workers whose biweekly pay is below $4,000 on a pretax basis, and it runs from Sept. 1 until the end of the year.

Workers and their employers split the responsibility for the payroll tax: a 12.4% levy that funds Social Security, plus 2.9% to cover Medicare.

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The Social Security tax is subject to an annually adjusted wage cap ($137,700 in 2020), but the Medicare tax continues to apply beyond that amount.

Even as the effective date of the holiday has arrived, not all employees can necessarily anticipate a temporary bump in their paycheck.

“It doesn’t explicitly say the employer must participate,” said Ed Zollars, CPA at Zollars & Lynch in Phoenix. “There will be lots of businesses that won’t do it — some because they don’t have the software that will let them do it, or their payroll service has no method to do it.”

Above all, remember that this deferral is only temporary. It will take an act of Congress to forgive the taxes.

Here are a few questions weighing on the minds of employees, and answers from the experts.

Source Article from https://www.cnbc.com/2020/09/01/today-is-the-first-day-of-the-payroll-tax-deferral-heres-what-we-know.html

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