The IRS clarified on Friday that companies will be obligated not to take Social Security taxes from paychecks starting next week running through the end of the year.
Nearly all Americans are taxed 6.2% per check to go toward Social Security. For now, barring any action from Congress, most Americans will see larger paychecks through the end of the year. The guidance is based on an executive order signed earlier this month by President Trump in hopes of stimulating the economy.
The Social Security tax deferment is applicable to workers who make up to $4,000 on a bi-weekly basis. Those making more than $4,000 every two weeks will continue to have their Social Security taxes withheld from checks.
The deferment is not an actual tax cut, and because the deferment was done via executive order rather than an act of Congress, the taxes will need paid back by April 30, 2021.
The White House has said they would like to see the elimination of the Social Security payroll tax be made permanent in an effort to lower the tax burden. Opponents say that eliminating the tax on Americans would make Social Security insolvent.
Stephen Goss,the chief actuary for the Social Security Administration, told the US Senate this week that a hypothetical bill that would make the tax deferment permanent would cause Social Security to no longer be able to make payments to beneficiaries by the middle of 2023.
For employees making $30,000 a year, the elimination of Social Security taxes would result in an extra $71 per paycheck every two weeks. Assuming the employee has eight paychecks left in 2020, that would result in $572 in taxes deferred in 2020, which would be repaid in 2021. For employees making $60,000 per year, those figures would be doubled.