“It’s pretty much beyond our control,” Many federal employees can’t opt-out of payroll tax deferral

Published: Sep. 27, 2020 at 6:31 PM CDT
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ROCK ISLAND, Ill. (KWQC) - Thousands of people across the United States may have seen a change in paychecks due to an executive order for a payroll tax deferral.

This is due to President Trump’s executive order from August 8, which will temporarily defer the 6.2% social security tax withholding. That means you may be seeing a larger paycheck now, but you’ll see a smaller paycheck next year when you’ll have a double withholding from January until the end of April. This effects those who make under $4,000 per pay period, or about $8,000 per month.

Private companies can opt-out, but many federal employees don’t have that option. Steve Beck, the Vice-President of AFGE Local 15 Rock Island Arsenal, explains Arsenal employees didn’t get to choose whether to opt-in, “it’s pretty much beyond our control.” Becks says the Secretary of the Army sent a memo to workers encouraging workers to look at their paychecks and finances, “essentially saying, you know, don’t really spend this money because you’re going to have to pay it back. It’s not tax forgiveness, it’s just a delay of paying the tax.”

Beck says some of his coworkers say they don’t see a long-term benefit to this deferral program, since the taxes will still have to be paid in just a few months. He adds there’s been some confusion between the message from President Trump and their leadership, with army leadership’s recommendation they save the money to pay back in January. “For employees, it’s kind of like, what is this? Why are we doing this? And there doesn’t appear is there’s any real net benefit in terms of dollars for people,” says Beck.

Another aspect he says may not have been considered, is the technical cost of adjusting thousands of employee salaries in software, “that is a cost that the government will incur for changing the payroll system. One defers the taxes, and then two, to put the taxes back in effect in a double rate.”

Some employees may also get a raise or retire before April, which means it will be on the retirees to pay the taxes back instead of it being taken out of their paycheck.

Beck says the union represents nearly 2,000 Arsenal workers.

The postal service was able to decline the tax deferral.

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