SPRINGFIELD, Mo. — President Trump’s executive order to help businesses and employees out during the pandemic, the Payroll Tax Deferral, begins September 1.
Michele Smith, a CPA and manager at Elliott, Robinson & Company, specializes in tax at the firm and says the executive order signed by President Trump allows for employers and employees to defer having social security taxes taken out of each paycheck through the end of the year.
“The overall idea or theory behind this is that, yes, it is to put cash in taxpayers’ pockets right now and free up cashflow to employers right now to use those for operations when they see these restricted cashflows during the pandemic,” said Smith.
Under the executive order, employees who defer would see a boost in paychecks until the end of the year but would receive smaller take-home pay for the first four months of 2021.
“Basically, the Social Security Tax is going to be doubled up on those paychecks, or from those paychecks during that first four months of the following year,” said Smith. “There’s always a day of reckoning because, at this time, it’s only a deferral. It’s not a forgiveness.”
Smith says while more money now and less money later might sound good, make sure you weigh your options thoroughly.
“What if an employee leaves before December 31? Well, the employer is ultimately responsible for remitting those taxes,” said Smith. “Understanding the risks of the options set before you and the benefits before you make a choice to move forward is what’s at hand here.”
If an employer decides to participate, but the employee does not want to, Smith says an arrangement can try to be made between the employee and the employer to still have those taxes taken out each paycheck.