Financial Discussion

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.

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.

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.

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.

They are going to hold back double the amount normal starting in January in order to pay it back.

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

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.

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.

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?