Well, somebody once said, “The only constant in the universe is change.” When it comes to taxes, in 2020, that is sooo true! We’ve had several acts by Congress and even the president through executive order. Now we get another one.
I think it is interesting that another Trump executive order at the same time was to increase the unemployment benefits by $400 a week and then his critics complain that this executive order only benefits folks who work. Do they realize that the extended unemployment benefits only help those who DON’T work? Well, I’m glad there is something out there for working folks, not just unemployed folks.
It’s basically telling any employee, if they want, that they can choose to not have Social Security taxes (6.2%) withheld from their paycheck from Sept. 1 through Dec. 31.
The key to remember is that this executive order is only “deferring” the payment of the Social Security tax, not “forgiving” it. In the past, Congress has eventually forgiven such taxes. The last time was in 2011 when Obama was president. He reduced the payroll tax by 2%, which was eventually forgiven by Congress. If Congress doesn’t “forgive” this “deferred” tax down the road, then potentially, the employee will need to pay it back. (There would be no interest or penalties, just the original amount not paid would need to be paid back, probably over some time period to make it less burdensome.) The chances of that happening are pretty small. No politician likes to upset a lot of potential voters by not forgiving the unpaid tax. But, because there is a risk, however small, that is why each employee needs to decide if they want to have Social Security taken out or not.
So how does this work? Basically, if you make less than $100,000 a year and/or $4,000 every bi-weekly pay period, you are eligible. Just ask your employer NOT to withhold the 6.2% Social Security Tax from your paycheck.
If you are an employer, you might want to document that you are informing all your employees and giving them to ability to choose this or not. By the way, as an employer, you must still pay the other half of your employee’s Social Security (another 6.2%). You are not off the hook for that, only your employee can elect to not pay their share.
So if your paycheck is $1,600 every two weeks, you would see an extra $99.20 in your net check. Hey! That’s almost an extra $100 every two weeks for the rest of the year. Will that help pay for some Christmas gifts? Extra food at the grocery story? Get some nagging problem repaired on the car? Cover a house repair bill you’ve been putting off? Etc.
One thing to consider. What if you decide NOT to have it taken out, you could have gotten an extra $800 in your pocket but you chose not to, and Congress does eventually forgive the unpaid Social Security amount. If you didn’t choose to have the Social Security portion of your taxes stopped for the rest of 2020, you’re out of luck. You can’t ask for it later.
Did you hear? Job 30:24 says, “Yet does not one in a heap of ruins stretch out his hand, and in his disaster cry for help?”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.