Military and federal workers brace for tax hit

ORLANDO, Fla. — “It almost sounds like Uncle Sam is going to be the Grinch of Christmas.”

That is how Army combat veteran Garrett Cathcart described the impending tax hit for federal workers, including members of the armed forces.

Cathcart, who is the Executive Director of veteran advocacy group “Mission Roll Call,” is sounding the alarm about payroll taxes that will be owed by service members after January first.

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In September, President Trump signed what he called a payroll tax cut. But, the order only deferred the collection of payroll taxes; about 6.2% through the end of the year. Because the president’s order did not have any funding, all of the money that was not collected will need to be repaid after the first of the year.

“I didn’t have a single client who did it,” says Adam Markowitz, a central Florida Enrolled Agent.

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Markowitz points out that private employers were given the option of not participating in the deferral since the money would be owed after January 1. However, federal employees, including the military, did not get that option. Now they will have to re-pay all of the money that was withheld.

“There’s going to be a lot of federal workers that are really upset when they start seeing additional money for paying back Social Security on top of their regular Social Security coming out of their checks here in a couple of weeks.”

“Per IRS guidance, the Social Security taxes deferred in 2020 will be collected from pay between January 1 and April 30, 2021,” wrote the Department of Defense in a letter to military families, “At the end of December, the 2020 Social Security tax deferral will end. Beginning January 2021, the normal 6.2% Social Security tax withholdings will again be deducted from pay for military members and civilians, and an additional deduction for the deferred 2020 Social Security tax collection taken from pay.”

Congress could forgive this money, but so far has not acted. During the election, President Trump’s campaign said the President would forgive the money after the election, but so far he has not taken any action.

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Meanwhile, members of the military and federal employees will start to see the double deduction come out of their paychecks on January 16, just four days before the end of President Trump’s term in office.

“A lot of service members, they’ve been busy training, going in the field, and been away from home and you stack that on top of COVID and then on New Year’s Day they’re going to wake up and see they’re paying double in federal taxes,” says Cathcart.