This was largely passed as an alternative to an additional stimulus package.
The only people eligible for this change are individuals earning less than $104,000 annually or $4,000 bi-weekly. It defers the 6.2% tax on your income going towards Social Security. But this tax isn’t being forgiven, it’s only being deferred. In January 2021 until April 2021 your employer will withhold the amount that was deferred on top of the normal amount that should have been withheld.
While it could be tempting to run out and spend that additional money, I would recommend you save it for when your paycheck drops in January.
I will note that President Trump has suggested he would like to have this payroll tax be forgiven but that’s contingent upon his re-election in November. As a note, the President does not have the power to make any changes to the tax code without it being passed by Congress first.
Not all companies are participating in the tax holiday or they may provide employees the option to opt-out before it goes into effect. I would recommend checking with your employer’s payroll department and ask if your company is participating. The only employer that will not provide an opt-out is Federal employees including military personnel.
Please feel free to reach out to us at Accruent Wealth Advisors if you have any questions about the content of this article or any other financially challenging issues you may be facing.
David Klepeisz, CFP, EA is a senior Wealth Advisor at Accruent Wealth Advisors located in Winston-Salem NC. He and his wife Hannah and their 2 golden retrievers, Rye and Foster reside in Mocksville, North Carolina.