The federal government is allowing employers to defer some payroll taxes this fall, which could give your paycheck a boost. The catch, though, is that it could DOUBLE your withholdings in your early 2021 paychecks if Congress doesn’t act to forgive the deferred taxes.
Three important things to note:
- Employers can decide whether they want to participate in the deferral program.
- If your employer offers it, they may ask you whether you want to take the deferral or not.
- Employees who earn less than $4,000 bi-weekly ($104,000 yearly) qualify.
If you qualify and your employer offers it, it’s important to understand: It’s not a tax deduction. In other words, it’s not free money. The taxes will still be deducted from your paycheck eventually, unless Congress votes otherwise (as President Trump intended). So, while you may enjoy a tax break through the end of the year, your paycheck may be equally less January through April 2021 to make up for it. If you quit or are laid off, your employer might be able to withhold the entire delayed amount in that final paycheck (although IRS guidance hasn’t been clear about that).
The bottom line: Be sure you’re aware of your employer’s intentions so you’re not caught off guard. If you’ve been told your employer is participating or you suddenly notice a bigger paycheck, be sure to ask about the details. Will the taxes be taken out of your paychecks in 2021? How much at a time? A deferral now—during the holiday season—could be great, as long as you know what to expect when the New Year arrives.
FIND YOUR NEXT OPPORTUNITY WITH HT GROUP
Ready to move your career forward? Connect with The HT Group today!