Congress remains undecided on what the next COVID-19 stimulus package might look like. While negotiations continue, President Donald Trump has announced a series of executive orders. One of those orders includes implementing a payroll tax holiday. This order is designed to leave money in the wallets of some U.S. workers.
The executive order details that any employee who is paid less than $4,000 before taxes on a bi-weekly period or $104,000 a year would be eligible. For those paid in a different manner, the order calls for the division of the employee’s pre-tax annual salary by 26. This will determine in the employee’s pay reaches the proper criteria for the savings. This order could save each employee 6.2% per pay. The savings is the amount that is usually withheld for Social Security. Usually, both parties pay half but with the new order, calls for employers to refrain from withholding the employee amount while they would still need to pay their portion.
How long will this payroll tax holiday last? The order calls for the deferral to begin on September 1, 2020 and end on December 31, 2020.
One of the questions being asked about this deferral is if and when will these payroll taxes need to be paid back? President Trump’s order calls for the secretary of the Treasury to look into ways and possible legislation that would take away the need to repay the tax dollars. It will be up to Congress how to approach any permanent forgiveness.
The order is being met with some pushback, with those not in favor feeling like the payroll tax holiday won’t provide enough financial relief to those that are in real need- those without jobs right now and not paying payroll taxes.
We will keep you posted on the developments of this executive order as they unfold. Feel free to reach out to us with any questions.