ATLANTA - For some of you, your paychecks might be bigger because of President Trump’s new payroll tax deferment which started September 1st. But you really need to know that this is not free money.
If your employer participates in this presidential executive order, yes, you will have a bigger paycheck for the rest of 2020. But starting January 2021, you will have to begin to pay it back.
Atlanta-based CEO of oXYGen Financial explains how this works.
"So the president set forth that when you pay payroll taxes, which is typically 6.2 percent which goes into social security and 1.45 percent into Medicare. If your employer participates in this payroll deferral plan, you cannot pay those payroll taxes for the last four months of the year. For an individual that makes $50,000 a year that would mean about an additional $1,000 into their paycheck between September 1st and December 31st here in 2020."
THE FOUR-MONTH TAX HOLIDAY BILL COMES DUE JAN. 1, 2021. (FOX 2 Detroit)
So, come January the regular payroll taxes would be reinstated and on top of it, you will pay back – in four months - the last four months of missed tax payments.
It’s a deferral. Not free money.
If you are in dire straights, consider it, Mr. Jenkin told the FOX 5 I-Team. If you are not, pass on this. If your company opts to do this, you can opt out.
MILITARY AND FEDERAL EMPLOYEES HAVE NO OPT-OUT OPTION
If you are US military or a federal civilian employee, you will be REQUIRED to participate. You cannot opt out.
So while you’ll have more than 6 percent of your paycheck this month, come January, it’ll be more than 12 percent lower than that check. That’s substantial if you’re not planning on it right after the holidays.
If you are forced into this option, do what you can to set that extra money aside and not spend it, unless you are very sure you can handle the smaller paycheck come January.