President Trump, through a Presidential Memoranda has implemented an across-the-board payroll tax deferral beginning this pay period through the end of the calendar year. Employees will be required to pay back the deferred tax and may be subject to penalties and interest. Many questions remain about the plan and its potential impact on the workforce.
We are working to find a resolution, but at this point, we recommend Members review their LESs and keep close account of any differences. Employees will see an increase in what they receive, but will have to either pay next year or have similar amounts withheld in addition to what is normally withheld come January. In other words, Old Age, Survivors and Disability Insurance (OASDI) contributions will be reinstated come January and employees may have their paycheck further reduced in the amount that was deferred as part of a repayment plan.
For example an employee normally pays $100.00 in OASDI and take home is $1000.00 per pay check. OASDI will be withheld through the end of the year, increasing the paycheck to $1100.00. Then come January the deferral ends and repayment begins, meaning the employee will be paying the normal $100.00 in OASDI and the repayment $100.00 in OASDI, for a total of $200.00. This equates to a take home of only $900.00 per pay check until repayment is complete.
Collection however, has yet to be determined and this is significant. OASDI is a pretax deduction, however repayment may be collected as an after tax measure, through a tax bill or annual filling. The ramifications of this initiative are far reaching as it could impact an employee’s tax bracket, both on the deferral side and collection the following year. NFFE legal has stated that this should not be an issue, but we are still investigating.
Rest assured that we are actively working to find out more about this issue and what we can do to mitigate any negative impact. Please see the article linked here. The Presidential Memorandum can be found here.
If you have any information that would be helpful for our Members, please contact the National Officers so we can disseminate as appropriate. Please stay tuned to this website for updates.