Donald Trump’s payroll tax cut, which he issued through an executive memorandum, has important implications for peoples paycheck. Amongst other things, suspension of payroll taxes is one of Trump’s top priorities. The President was extremely swift in making this move. It happened when Congress did not include a payroll tax cut in a potential stimulus deal. Trump immediately used executive action on August 8 to introduce a payroll tax holiday.
Now what does this mean exactly? How do people determine if they will be affected? The 3 key points to focus on are:
- Sept. 1 was the first day of President Donald Trump’s payroll tax deferral, a temporary suspension of the 6.2% Social Security tax that employees cover. It’s in effect until the end of the year.
- Recent guidance put employers on the hook for collecting and remitting the deferred tax, which they must do by April 30, 2021 or else face penalties, interest and additional tax.
- Not all employers may take up the deferral, so you’ll want to talk to your human resources representative or a payroll representative to see how your company will proceed.
While the guidance does allow employers to “make arrangements” to collect taxes from an employee, it could prove challenging if a worker quits his or her job. “When most people quit jobs, they don’t want to be found, especially if you want to collect money from them,” said Nicole Davis, CPA and founder of Butler-Davis Tax & Accounting in Conyers, Georgia.
In a directive issued by Donald Trump, he said “this modest, targeted action will put money directly in the pockets of American workers and generate additional incentives for work and employment, right when the money is needed most”. With this still being fairly new and both employers and employees figuring everything out, we will definitely keep you updated.