Many workers may never see payroll tax cut, questions loom

A new executive order by President Donald Trump to suspend the collection of some payroll taxes was touted by the White House as a boon to struggling workers.

But, with details uncertain many employers and employees may never see any savings.

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Over the weekend, Trump signed a series of executive orders. One of those orders directs the U.S. Treasury to defer the collections of some federal payroll taxes. But, because this is a deferment, the money is still owed. Congress could forgive the deferment through legislation, however, without forgiveness the deferred money would still be owed.

“Until we get guidance as to how the money will be withheld and how it will be paid back I cannot advise anybody to think about this at this point,” says Adam Markowitz the Vice President of Markowitz Accounting. “There is so much uncertainty right now especially for the small business owner.”

Federal payroll taxes are imposed at 15.3%, with employees and employers splitting that cost. The order from President Trump directs Treasury to defer about 6% of the collections.

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The money collected through payroll taxes goes to Social Security and Medicare, two safety net programs that are running out of money; with Social Security projected to be out of money as early as 2025.

“If you were to ask me am I going to do this for my company, absolutely not,” says Markowitz.

The U.S. Treasury has already admitted it cannot force companies to defer these collections. As a result, there is concern that in 2021, employers or employees could be required to pay back any deferred collections.

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Some companies have indicated they might withhold the money from payroll and if it is forgiven by Congress in 2021, then give it to employees, something that would defeat the purpose of the President’s signed executive order.

Cox Media Group