But it's also possible that the economy could be in much better shape by early next year than it is now. And in an unfortunate irony, the relief doesn't flow to jobless people — just those still drawing a paycheck. Workers pay 6.2% of their wages to help finance Social Security, while employers pitch in another 6.2% on behalf of employees. "The only way to achieve a workable proposal is for Congress and the administration to come together and enact a change in the law.". These taxes are paid on the first $137,700 in wages (for 2020), with no taxes on income above that. With Congress unable to agree on another stimulus bill to boost the economy and support financially distressed Americans, President Donald Trump on Aug. 8 issued a series of executive orders. The idea is for more wages to pass through to employees, presumably encouraging them to spend more. Questions remain unanswered as White House casts upbeat outlook on Trump's COVID-19 fight, White House staffers get email saying to stay home if they experience coronavirus symptoms, White House says 'appropriate precautions' were taken for Trump's outing to see supporters, Economist Richard Wolff discusses economy's role in fighting COVID-19, Several countries are racing to come up with a coronavirus vaccine — together. Employees and employers also pay another 1.45% each to support Medicare. That remains to be seen, though the impact could be muted compared with the $1,200-per-person stimulus checks that were sent out earlier this year. He has said he would forgive any deferred taxes if he wins reelection in November, though such a move would require congressional action. Tax experts said the guidance leaves a number of key questions unanswered, such as what happens if an employee leaves a company before April 30, and how the guidance applies to seasonal workers and employees with irregular hours. AZ International Auto Show & New Car Buyer's Guide 2020 Model Year, Your California Privacy Rights/Privacy Policy. The orders Trump signed would provide an extra $400 in unemployment benefits, suspend some student loan payments and protect renters from eviction. It doesn't appear that independent contractors will benefit from this provision, Luscombe said. The release of the three-page notice comes just days before the Tuesday start date for the deferral period. It's not clear if the new executive order affecting the employee's share will follow that timetable. However, it makes clear that employees will be required to pay more taxes beginning in January to offset any benefit they receive now," Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce, said in a statement Friday. For more stories that matter, subscribe to azcentral.com. The order will temporarily cut those taxes for workers who earn less than $4,000 biweekly, or less than $100,000 annually… In addition, the Trump Administration has vowed to borrow money to finance any temporary shortfall, with Larry Kudlow, the White House economic adviser, calling it a "very manageable number.". Social Security's finances already are under strain, with the latest Trustees' report predicting the current surplus will be depleted by around 2035, after which an across-the-board benefit cut or similar action might be necessary. Under the guidance, employers can opt to not withhold Social Security payroll taxes from their employees’ paychecks from September through December. "It is the unemployed who need help, not so much Americans who are still working," noted Mark Hamrick, senior economic analyst at Bankrate.com. That's not clear. The contents of this site are ©2020 Capitol Hill Publishing Corp., a subsidiary of News Communications, Inc. In short, Trump's payroll tax cut gives you a four-month 6.2% raise. Here's a closer look: The order deals with payroll levies known as FICA taxes that are paid to support Social Security and Medicare. To pay the amounts that were deferred, the amount of Social Security payroll taxes withheld from employees’ paychecks would increase from Jan. 1 through April 30. The order doesn't affect everyone, and those taxes eventually must be paid. "The guidance continues to leave many practical questions unanswered. While the intent of the order was to make the payroll-tax holiday mandatory, said Luscombe, "Some employers seem to think they can treat it as an option," either because their payroll systems can't easily implement such a quick change or because they worry about employees having to pay such a large chunk of taxes next year. Workers pay 6.2% of their wages to … Many workers won't find all that much extra cash in their take-home pay, and unemployed people won't be helped at all by the move. Still, it's hard to view interruptions like this to Social Security's revenue flow without growing a bit uneasy. The release of the three-page notice comes just days before the Tuesday start date for the deferral period. President Donald Trump signs executive orders for coronavirus relief. On Aug. 8, President Trump signed an executive order calling for a deferral of the employees’ portion of the payroll tax from Sept. 1 through the end of … President Trump signed four executive orders for COVID-19 relief but American's may not see benefits without congressional approval. Hamrick also sees it as a problem for payroll-processing companies, and he wonders if workers will be "rightly concerned about having their paychecks taxed more heavily in the future to make up the difference.". Documentary filmmaker discusses experiences that shaped Trump, Biden. That concern has been raised in response to the executive order, by AARP and others. In part, that's because any extra cash an employee might receive would be spread out over the four-month period instead of received in a lump sum. The IRS late Friday released guidance implementing President TrumpDonald John TrumpQuestions remain unanswered as White House casts upbeat outlook on Trump's COVID-19 fight White House staffers get email saying to stay home if they experience coronavirus symptoms White House says 'appropriate precautions' were taken for Trump's outing to see supporters MORE’s executive order from earlier this month on deferring payroll taxes. Neither Democrats nor Republicans in Congress included the tax delay in stimulus measures they proposed in recent months. The executive order delays withholding and payment on the 6.2% employee Social Security portion only, said Mark Luscombe, principal analyst at researcher Wolters Kluwer Tax & Accounting. The order deals with payroll levies known as FICA taxes that are paid to support Social Security and Medicare. If all these withheld payroll taxes eventually are remitted after the delay, the order might not have much long-term impact. COVID-19 stimulus: Trump signs new executive orders despite stalemate. Trump signed a memo on deferring payroll taxes earlier this month in an effort to provide relief to workers amid the coronavirus pandemic. Basically, that means it would apply to people making up to around $104,000 annually, though that includes most Americans. There are other lingering questions too, such as whether employees can opt to have taxes withheld anyway, even if their companies don't adhere to the order. The IRS notice states that if necessary, employers “may make arrangements to otherwise collect the total Applicable Taxes from the employee.”, Seth Hanlon, a senior fellow at the left-leaning Center for American Progress, said Friday that “there’s a lot of situations where this guidance doesn’t provide any guidance.”, Kyle Pomerleau, a resident fellow at the right-leaning American Enterprise Institute, said that “the guidance didn’t really answer all that many of businesses’ or the tax community’s questions.”, The Hill 1625 K Street, NW Suite 900 Washington DC 20006 | 202-628-8500 tel | 202-628-8503 fax. Reach the reporter at russ.wiles@arizonarepublic.com. Trump ordered the Internal Revenue Service to provide further guidance. Cynics might view this as a gimmick designed to provide a temporary adrenaline rush for the economy to boost Trump's reelection bid. What is a coronavirus super spreader — and why are they super dangerous? The CARES Act passed earlier this year already allowed a payroll-tax deferral on the employer's share, from March 27 through year-end, with repayment allowed over a two-year period, according to Wolters Kluwer. Temporary. ’s executive order from earlier this month on deferring payroll taxes. A number of business groups have raised concerns about the order, arguing that there are some uncertainties about how it would apply and that a deferral could be challenging for employees who could face more taxes next year. And all employees aren't eligible — just those earning $4,000 or less per biweekly pay period (or the equivalent amounts for other pay periods). The payroll tax will be postponed for four months, from Sept. 1 through Dec. 31. One is designed to put a bit more cash in workers' pockets by relaxing the requirement to withhold their payroll taxes. Employers can only defer payroll taxes for employees who make less than $4,000 on a biweekly basis. Assuming a worker earning $60,000 a year doesn't have that 6.2% withheld for four months, the temporary cash flow would be around $1,240, spread over four months. The payroll tax is 6.2%, according to the IRS. Many businesses are not expected to implement a deferral, and are expected to continue to withhold payroll taxes from their employees’ paychecks. Profits for large corporations in the Standard & Poor's 500 stock index are on pace for a 21.6% slide in 2020, but Wall Street analysts are projecting a 25.6% surge in 2021, according to Sheraz Mian, who tracks earnings trends at Zacks Investment Research. After that, the tax will need to be withheld and paid.