Author: Shaun Erickson
Beware of the Payroll Tax Deferral
You are going to want to pay close attention to your paycheck over the next couple of months. If you happen to see some extra $$$ in it, don’t get too excited and certainly don’t spend it all too quickly.
So, what is this all about?
President Trump has issued an executive order allowing employers to choose if they want to stop withholding payroll taxes on behalf of their employees through the end of the year. Those who make under $104,000/year are eligible. For someone making $80,000/year, this could mean an increase in their take home pay of $1,653 between now and the end of the year.
Sounds great! Wait, what’s the catch?
The catch is this is only a deferral of these payments. Meaning, you will have to pay them eventually. Eventually is in early 2021. Starting in January, not only will your paycheck go back to its prior withholding amount, but, your employer will need to double up your payroll tax withholding to make up for the deferral. Meaning, a lower amount in your paycheck come January 2021.
The deferral could certainly provide some immediate relief to families who are struggling financially today. However, it seems it is often the case that the communication as to why your paycheck just went up isn’t always clear and I fear that many people will be caught off guard come January when their paychecks drop!
So, keep an eye on your paycheck, and if you see a little more $$$ now just be sure to plan ahead for January to avoid a future financial burden when you will have to make those payments back.
Author: Seth Corker
Were you surprised by your tax bill the past couple of years? It’s possible that is due to changes in the way taxes are now being calculated to be withheld from your paycheck.
In this FINANCIAL HIGHLIGHT Seth Corker deciphers the new W-4 form and provides some tips on how to complete it.