President Trump recently issued an executive memorandum suspending the collection and payment of Social Security payroll taxes from September 1 until the end of the year for workers making less than $4,000 for any bi-weekly pay period (i.e., $2,000 per week, or $104,000 per year). The president's action doesn't eliminate the tax debt – it just delays withholding and payment of the tax. However, the memorandum didn't say when the tax had to be paid. But the IRS has answered that question.
Employers aren't required to halt withholding and payment of the tax. But if a business does comply with the president's order, it will have to collect the deferred taxes from their workers' paychecks ratably from January 1 to April 30, 2021. So, during the first four months of 2021, their employees will have double withholding from their paychecks for the 6.2% Social Security payroll tax.
If he wins the election on November 3, President Trump says he will push for the elimination of the deferred taxes so that workers will not have to pay them later. However, that will require Congressional action. Depending on the election results, that could be a very difficult thing to get.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
As a result, if your employer stops withholding the payroll tax from your wages in 2020, you probably don't want to spend that money right away. Our advice is to put that money aside for the time being. While it's possible Congress will eliminate the tax debt, that doesn't appear to be likely. If there's no Congressional action, then the deferred taxes will be taken out of your paycheck during the first four months of 2021.
For more information on the president's executive order to defer Social Security payroll taxes, see What Trump's Payroll Tax Cut Will Mean for You.
-
How a Part-Time Job in Retirement Can Boost Your Social LifeA part-time job in retirement, like walking dogs or helping with home projects, can combat loneliness by sparking new friendships and boosting your social life.
-
What Set Warren Buffett ApartAs Warren Buffett prepares for retirement, we reflect on what we've learned from his 60 years of leadership at Berkshire Hathaway.
-
How the 2025 Child Tax Credit Rules Impact Single ParentsTax Credits New changes to family tax credits, like the Child Tax Credit, will impact the eligibility of some households.
-
The Fall Garden Tax? What to Plant and How to PrepareTax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.
-
How Your 2025 Summer Wedding Could Save You Money on TaxesTax Breaks There are some wedding expenses that are tax-deductible, and you don’t want to miss out on savings.
-
Texas Sales Tax-Free Weekend 2025Tax Holiday Here's what you needed to know about the Texas sales tax holiday.
-
Retirees Should Watch These Four Key Tax Changes in 2025Tax Changes This year brings key tax changes that could affect your retirement taxes and income.
-
The Most Tax-Friendly State for Retirement in 2025: Here It IsRetirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Tariff Stimulus Checks Coming? New Proposal Seeks Tax Rebates for US WorkersTax Breaks A new GOP bill proposes to send $600 in tariff rebate checks to eligible taxpayers. Is there a catch?
-
Biggest Winners and Losers in Trump's New Tax PlanTax Law Trump’s mega tax overhaul, known as the ‘One Big Beautiful Bill,’ has distinct winners and losers. Which group do you fall into?
