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Trump’s Payroll Tax Deferral: Sounds Great But How Does It Help You?

    • Executive order defers, but did not eliminate, an employer’s Social Security tax liability
    • Applies to people who “generally” make less than $4,000 every two weeks ($104,000 annually)
    • Long-term goal of US Treasury is to have this forgiven
    • Lawmakers on both sides grapple with benefit given millions not on payroll

In order to break the legislative stalemate that Congress finds itself in, President Trump took much-needed action through four executive orders over the weekend to provide further relief to small businesses and individuals as the Coronavirus pandemic recovery trundles along. Of the four areas covered by the EOs, a deferral of the employer’s portion of the payroll tax was the most sought after and controversial since the President signed the documents. The payroll tax deferral has been discussed at length in the public forum since the beginning of the pandemic, often being used as a political football for legislators on both sides of the aisle. However, for each American, what does this mean for you and your money? Let’s break it down:

    • WHO:
      • The deferment is aimed to help employers keep cash in their business longer by deferring certain tax obligations
      • This applies to people who “generally” make $4,000 per week or $104,000 on an annualized basis
    • WHAT:
      • The US Treasury Department has delayed an employer’s obligation of the 6.2% Social Security check that they pay on behalf of their employees
    • WHEN:
      • The deferment will start on September 1 and will last until December 31, 2020
      • The deferred payroll taxes are currently still owed at the beginning of 2021
      • While the tax liability has been delayed, not forgiven, the US Treasury Department is currently looking at ways to make the liability permanently forgiven
    • WHERE:
      • The US Treasury Department is the overseeing government body along with the IRS
    • WHY:
      • By deferring the payroll taxes, President Trump hopes to provide further relief to small businesses as they continue their struggle to survive the Coronavirus pandemic
      • Lawmakers on both sides have raised concerns regarding:
        • Constitutionality –> Congress is supposed to “control the purse strings”
        • Effectiveness –> Many employees are still unemployed and thus not on any payroll
        • Magnitude –> Will this cause that much of an increase in take-home pay?

President Trump has set the tone and a path forward to act if Congress will not. Check out our DSJ COVID-19 Information Center or call our offices at (516) 541-6549 to speak to our Coronavirus Response Team to stay current!

Sincerely,

Stephen Jahelka
Chief Business Officer, Disaster Relief Consultant

Contact:
516-541-6549 | Email

 
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