Breaking down the federal payroll tax break
OMAHA, Neb. (WOWT) - A federal payroll tax break went into effect that lets you keep the 6.2% you pay in taxes to social security. It last September 1st through December 31st but there are strings attached.
Not everyone is eligible.
“Employees who make under $104,000 a year to elect between September first and December 31st to defer their social security tax,” Owner of Midwest Accounting and Tax Services John Gross said.
If your employer allows it, and you opt-in, the taxes you defer on will be owed eventually.
“So what can happen to start in January one of 2021, you’ll not only be responsible to pay the current 6.2% but you’ll also be responsible to pay the forgiveness tax,” Gross said.
Meaning you will end up paying 12.5% on paychecks starting January 1st, 2021.
Businesses we talked to said they’re still talking with their employees, including the owner of Ted’s Service Station, Steve Bertagni.
“We were fortunate to struggle through and stay open through all of this,” Bertagni said.
He’s working with employees to figure out what works best for them. He doesn’t expect much to change since they were able to work through the pandemic.
“Financially they haven’t been impacted at all so I don’t see to their advantage to go ahead and have a deduction now only to in the end have to pay that much more,” Bertagni said.
Gross said finding out if a deferral works for you is on a case by case basis. Contact your employer or accountant if you have questions.
“The whole idea of this tax deferment was to allow people to have more money in their paycheck for people who have been deferred this previous year or they just need a little extra spending money in their paycheck currently,” Gross said.
There has been some discussion if the deferral will be forgiven by the federal government but for now Gross said to treat it like you’ll have to pay it back.
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