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Polar Bear  
#1 Posted : Sunday, August 9, 2020 6:36:24 PM(UTC)
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I'm not 100% familiar what the payroll tax does entirely, will that affect federal workers? If so how?

This is all just assuming the exec order goes through and is implemented.
ex-military  
#2 Posted : Monday, August 10, 2020 4:10:38 AM(UTC)
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Originally Posted by: Polar Bear Go to Quoted Post
I'm not 100% familiar what the payroll tax does entirely, will that affect federal workers? If so how?

This is all just assuming the exec order goes through and is implemented.


"Payroll taxes" are the SS and Medicare taxes. Half are paid by the employee, the other half by the employer. Here is the thing: this EO just "defers" the taxes, so they will be payable at some point, probably at the end of the year. If employers are smart, they will continue to take the taxes out of the payrolls, knowing they will be due. The net effect to employees would be zero. Otherwise, the employers will have to explain to their employees why they are going to be losing half a paycheck (or more) when these taxes come due and it all needs to be paid at once.

All that said, these EOs will never go into effect, as POTUS doesn't have that kind of power/authority to unilaterally change tax law.
smithandjones  
#3 Posted : Monday, August 10, 2020 4:54:15 AM(UTC)

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It would if it were real. But it is just smoke and mirrors by Don the Con.

It is also not a good thing as it would destroy social security. We know Republicans and rich country club presidents want that but they can’t just declare it.

As mentioned above, tax power belongs to Congress. If Don the Con has any power it is to defer the tax during an emergency. Employers are responsible for deducting the tax from paychecks and paying to the government. If employers actually gave this money to employees, then the employers will become liable for it when the deferment ends (i.e., if Congress doesn’t approve). How many employers do you think will take that risk?

Don the Con is getting more and more desperate each day. He is a lame duck quacking.
EagleDog  
#4 Posted : Monday, August 10, 2020 8:45:40 AM(UTC)

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Originally Posted by: smithandjones Go to Quoted Post
It is also not a good thing as it would destroy social security.

Social Security would still get their money. It would be paid out of the general fund.
Exactly the same way it was done when Obama cut the exact same tax in 2011 and 2012.

Polar Bear  
#5 Posted : Monday, August 10, 2020 7:42:03 PM(UTC)
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So. If it goes through, how will it affect us? (my pay is drawn from the Treasury if that makes any difference to effects)
ex-military  
#6 Posted : Tuesday, August 11, 2020 4:31:30 AM(UTC)
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Originally Posted by: EagleDog Go to Quoted Post
Originally Posted by: smithandjones Go to Quoted Post
It is also not a good thing as it would destroy social security.

Social Security would still get their money. It would be paid out of the general fund.
Exactly the same way it was done when Obama cut the exact same tax in 2011 and 2012.



Differences: the 2011/2012 payroll tax cut, was just that, a tax cut that was passed legislatively by Congress. The actual law governing Payroll tax was changed (with a sunset provision). Trump's plan is a deferral of the tax, meaning it is still going to be paid at some point. He says he'll waive repayment if reelected. He cant do that unilaterally, and will need Congress. I don't see that happening. Another difference: the Obama plan lowered the actual tax rate. Trump's plan effectively temporarily brings the tax rate to zero, until the end of the year when, as mentioned, it all comes due. The problem is that means ZERO funds going into SS or Medicare for the rest of the year.
ex-military  
#7 Posted : Tuesday, August 11, 2020 4:51:01 AM(UTC)
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Originally Posted by: Polar Bear Go to Quoted Post
So. If it goes through, how will it affect us? (my pay is drawn from the Treasury if that makes any difference to effects)


IMO, this isn't going to work out, so dont hold your breath expecting to see any change at all. But, I will play the game. Here are some scenarios:

1. EO goes into effect and employers play along. Those two line items on your LES for OASDI and Medicare go to 0.00. In my case, that is an immediate increase in take home of a bit over $300/PP.

2. EO goes into effect and employers do not play along. NO effect on take home pay.
2a. Why would employers not play along? Because there is a very real possibility that all that money will have to be remitted after this deferral expires. Employers are responsible for remitting 100 % of the SS and Medicare tax due (50% employer, 50% employee)

3. EO goes into effect, employers play along, and now come the end of the deferral period, its time to pay up. Two scenarios here:
3a. Employers bite the bullet and pay both halves of the SS and Medicare. How many employers do you think are going to do that?
3b. Your (the employee) first couple of paychecks of 2021 are wiped out because all that back SS/Medicare that you haven't been paying for the last 5 months is now due. We have 10 PP left in 2020. In my case, that is over $3k due.

4. This is what POTUS is gambling on: EO in effect, employers play along an stop withholding, deferral period ends. Congress and/or new Administration doesn't have the cajones to come out and say "We need that money now" and collect. Trump is banking on either he gets reelected and he can convince Congress to change the tax law (which would be needed to waive repayment), or if Biden actually tries to collect, he and the GOP can point and say "see, raising taxes already".

Again, I don't see the EO going into effect, but if it does, I would expect Scenario #2 is most likely to play out.
clipse022  
#8 Posted : Wednesday, August 12, 2020 7:35:09 PM(UTC)
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Isn't the federal government required to comply with the EO? Any HR person here???
ex-military  
#9 Posted : Thursday, August 13, 2020 11:57:53 AM(UTC)
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Originally Posted by: clipse022 Go to Quoted Post
Isn't the federal government required to comply with the EO? Any HR person here???


IF they do this, I would suggest figuring out how much it is, and just putting it back and forgetting about it. That is gonna be a big chunk to come up with. I dont think folks realize how big a hit SS and Medicare really are.
someoldguy  
#10 Posted : Wednesday, September 2, 2020 8:11:09 AM(UTC)
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There's been a little more guidance on this. It is clear that anyone whose gross pay is $3,999.99 or less per pay period will not have to pay the OASDI for the rest of 2020. As to what happens in 2021, well, that has yet to be spelled out.

From what I have read, there's no payroll tax cut at all for folks who make more than that limit. So if your gross income per pay period is $4,000 exactly, you don't get any tax cut.

Also, some articles say 'gross pay' but others refer to 'social security wages' and I think some pre-tax deductions don't count toward that.

Anyway it is supposed to take effect the second pay period in September so we should find out soon enough. But if we have to pay this back in 2021 I don't know what the net effect would be???
DISCLAIMER: You read it on an open internet forum :)
ex-military  
#11 Posted : Wednesday, September 2, 2020 8:42:30 AM(UTC)
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Originally Posted by: someoldguy Go to Quoted Post
There's been a little more guidance on this. It is clear that anyone whose gross pay is $3,999.99 or less per pay period will not have to pay the OASDI for the rest of 2020. As to what happens in 2021, well, that has yet to be spelled out.

From what I have read, there's no payroll tax cut at all for folks who make more than that limit. So if your gross income per pay period is $4,000 exactly, you don't get any tax cut.

Also, some articles say 'gross pay' but others refer to 'social security wages' and I think some pre-tax deductions don't count toward that.

Anyway it is supposed to take effect the second pay period in September so we should find out soon enough. But if we have to pay this back in 2021 I don't know what the net effect would be???


They are going to hold back double the amount normal starting in January in order to pay it back.
someoldguy  
#12 Posted : Wednesday, September 2, 2020 9:33:55 AM(UTC)
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Some people will owe money, some won't. This could be a mess.
DISCLAIMER: You read it on an open internet forum :)
smithandjones  
#13 Posted : Wednesday, September 2, 2020 11:44:56 AM(UTC)

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Yes, it is a mess. As of now, those who make less than $104,000 per year will not have the tax withheld for the rest of 2020. The Department of Agriculture processes most federal paychecks and agreed to implement the plan. But the guidance from Treasury indicates that double the tax will be withheld for the first 4 months of 2021 to recoup the 2020 deferral.

Why do this? It is a political game and Trump believes it gives him leverage in negotiations to eliminate the tax (and social security) completely. Do you feel like a pawn in the game?

Also, if you do not pay the tax you will not earn social security credits and your benefits will be reduced. Yes, it is a mess.

Edited by user Wednesday, September 2, 2020 11:47:14 AM(UTC)  | Reason: Not specified

clipse022  
#14 Posted : Wednesday, September 2, 2020 7:19:38 PM(UTC)
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https://nfc.usda.gov/Cli...General/082120-OASDI.pdf

"On August 8, 2020, the President signed an Executive Order to defer employees
OASDI deductions due to COVID-19. The National Finance Center (NFC) is preparing
to make system modifications to the Payroll/Personnel System effective for pay period
(PP) 17, 2020, payroll processing which is the first PP to be paid after September 1,
2020."

Does this mean this upcoming check wont have any payroll taxes on it you make under 4K bi-weekly?
mallen  
#15 Posted : Thursday, September 3, 2020 8:48:49 PM(UTC)

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Exactly. Trump has the authority to ALLOW private sector employers not to deduct the taxes from your check, and to ORDER federal government employers not to deduct them. But you still owe those taxes. So don't spend that money. Next year you will have to pay it back unless congress passes a law that says you don't.

Trump SAYS that if he wins, he will get congress to pass such a law. But his part is unlikely to take back control of the House. As such, if Democrats loose, I don't see why they would be particularly willing to dig Trump out of the hole he dug himself,at least not without serious concessions, which he might not be willing to give.

I suspect that in the end something will be worked out, but don't bet your rent or mortage on that. If congress does not pass a law that makes it so we don't have to repay that, then what will likely happen is that it will be taken out of our checks next year. It's not clear if it would be done all at once (like you loose 1000 dollars or something from one paycheck) or if it will just be a double deduction for the first four months (each paycheck might have the normal tax taken out, plus that much again that you got each week for the rest of 2020). Be prepared for these eventualities so you don't have problems.
ex-military  
#16 Posted : Friday, September 4, 2020 4:04:34 AM(UTC)
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Originally Posted by: mallen Go to Quoted Post
Exactly. Trump has the authority to ALLOW private sector employers not to deduct the taxes from your check, and to ORDER federal government employers not to deduct them. But you still owe those taxes. So don't spend that money. Next year you will have to pay it back unless congress passes a law that says you don't.

Trump SAYS that if he wins, he will get congress to pass such a law. But his part is unlikely to take back control of the House. As such, if Democrats loose, I don't see why they would be particularly willing to dig Trump out of the hole he dug himself,at least not without serious concessions, which he might not be willing to give.

I suspect that in the end something will be worked out, but don't bet your rent or mortage on that. If congress does not pass a law that makes it so we don't have to repay that, then what will likely happen is that it will be taken out of our checks next year. It's not clear if it would be done all at once (like you loose 1000 dollars or something from one paycheck) or if it will just be a double deduction for the first four months (each paycheck might have the normal tax taken out, plus that much again that you got each week for the rest of 2020). Be prepared for these eventualities so you don't have problems.


Repayment will be via double deductions for four months.
foureyedbuzzard  
#17 Posted : Sunday, September 6, 2020 7:51:19 AM(UTC)
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So under Trumps current EO "plan", if taxpayer A was making $3999 per two week period, and for the 8 bi-weekly pay date periods had 6.2% (OASDI) uncollected and then forgiven, he would have gained $1983.50. But taxpayer B making $4001 per two week period would have paid (had deducted) roughly that same amount ($1984.50). B will have grossed $16 more over the course of that time period, but will have netted after taxes roughly $2K less. So, will congress clean up this mess via a refundable credit if the payments are forgiven for those affected?

One hair-brained scheme after another, and now the bankruptcy king is messing with SS without even the glimmer of a well thought out plan - other than to bankrupt it.
Polar Bear  
#18 Posted : Sunday, September 6, 2020 8:05:02 AM(UTC)
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So my LES for Pay period 17 (which was the one this weekend), still has SOCIAL SECURITY (OASDI) in the amount of 158.31 being withdrawn.
Polar Bear  
#19 Posted : Sunday, September 6, 2020 8:08:54 AM(UTC)
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So lets assume my payroll processing agency, the USDA, continues to take out OASDI taxes for the remaining part of the year, AND the actual taxes owed are forgiven or whatever 'magic' happens. Will I get that money back?
foureyedbuzzard  
#20 Posted : Sunday, September 6, 2020 8:50:45 AM(UTC)
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Originally Posted by: Polar Bear Go to Quoted Post
So lets assume my payroll processing agency, the USDA, continues to take out OASDI taxes for the remaining part of the year, AND the actual taxes owed are forgiven or whatever 'magic' happens. Will I get that money back?
That is my concern as well. And yes, you should if it's forgiven. Further, if the 6.2% tax for 8 pay periods is forgiven for those making under $4K per pay period, then it should, at minimum, be forgiven for that portion of wages up to $4K per pay period regardless of gross wages. Otherwise it's unequal tax treatment for all employees making over $4K per pay period. Otherwise, many would fall into a situation where those making just over the $4K threshold would wind up making money less than those under the threshold. Lots of problems with this whole plan.

Edited by user Sunday, September 6, 2020 8:51:33 AM(UTC)  | Reason: Not specified

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