The President’s payroll tax holiday is a temporary fix for the failed Coronavirus stimulus bill.
It may give you a temporary bump on your paycheck but you’ll be stuck with a bigger tax bill in April 2021.
Employers are deciding if they want to participate with the President’s payroll tax holiday.
The payroll tax deferment was signed by the president to give workers a bigger paycheck and get more money in people’s pockets now.
Why is it not a good idea for everyone.
First of all, employers need to decide if they’re going to participate.
If they do opt-in workers may not have not much say.
You will see a bump on your paycheck now, but your pay will significantly be smaller after January 1, 2021.
By law, you need to pay it back.
Essentially, these are for workers who make below $4,000/biweekly pretax max, around $104,000 a year.
Primarily, congress has the power to waive taxes. The president only has the power to defer it.
Whatever case you may be in you’re responsible to pay taxes come 2021. The 6.2% tax contribution towards social security tax will not be deducted but temporarily deferred to be taken out of your paycheck.
This means that taxes will come due by April 30,2021 or face possible penalties. Remember that this is a tax holiday or deferral and not a tax cut.
No mandatory opt-in option
The deferment does not mandate the employers to give you an option to opt-in with the program.
If your company decides to opt-in but you decide not to participate. Ask your HR department if you have an option to decline the tax deferment.
If your company does not have that option, you need to set aside 6.2% of your paycheck allotted for the taxes due for next year.
This is not free money
Again, this is not free money. This is a deferral of your taxes until the end of the year and not skipping it all together.
The smart thing to do, is to have some of these funds aside, 6.2% of your paycheck, so you don’t have a shocker next year when it become due.
