Payroll Tax Deferral for Federal Employees
To minimize the COVID-19 pandemic's impact on federal employees, the White House gave a presidential memorandum in August that federal employees' taxes should be deferred until next year. The payroll tax deferral applies to approximately 600,000 federal employees in the United States, and this deferral became active in September. Since the tax deferral came into effect, federal employees are getting paid regularly.
Can I benefit from the payroll tax deferral?
If you want to benefit from this tax deferral, firstly, you must be eligible. The categories of people that are eligible for the payroll tax deferral are federal employees and military personnel. After pre-tax deductions like premiums, federal employees have less than $4,000 per pay period. With the implementation of tax deferral, federal employees will now have more money since they don't pay taxes on their payroll.
The people do not generally accept the tax deferral because they know that they will still pay the tax back within the next three to four months. Many Americans work with the paycheck, and their main concern is that federal employees will spend all their money instead of setting aside some savings. When it is time to pay back the deferred tax, many people do not have sufficient funds to pay back the tax since they do not have another income source apart from their paycheck. Federal employees, just like the majority of Americans, do not have the size of the necessary fund they should have, and their source of money is not systemic. This problem applies to most Americans and is not exclusive to federal employees.
Since its implementation, the payroll tax deferral has faced criticism by progressive employees, federal employee groups, and unions. They criticize the plan by considering the need to repay the taxes, even with the present concern about the federal government budget. Unions and federal employee groups maintain that they are supposed to choose to opt-in or out of the plan, and it should not be made compulsory. If you want your tax deferred, you can opt-in, and if otherwise, you can opt out.
In the past few weeks, federal lawmakers, mostly Republicans, have sent many tax administrators letters. The letter seeks the choice of federal employees in the plan, such that they can decide if they want to participate in payroll tax deferral or not. The administration treasury secretary said that the lawmaker's ideas are great ones, and he will see how feasible it will be if they give people a choice.
