Social Security Payroll Tax Deferral Begins
On August 8, 2020, a Presidential Memorandum was issued to provide relief during the COVID-19 pandemic by temporarily deferring the withholding of Social Security taxes from September 1, 2020 through December 31, 2020. The Old Age, Survivors, and Disability Insurance (OASDI) tax (Social Security taxes) rate is 6.2%. So, service members and Department of Defense (DoD) civilians will see a temporary increase in their paychecks of that amount. At this time, based on Internal Revenue Service (IRS) guidance all deferrals will be repaid between January 1, 2021 through April 30, 2021 in addition to the amount normally withheld from their monthly pay.
As an example, if the monthly basic pay is $3,306.30 the service member would see an increase of $204.99 in their monthly net take home pay through December 31, 2020. In January, their monthly net take home pay would decrease $204.99, the deferred tax amount through April 2021 until the full amount is recouped.
A military service member or civilian employee should think about whether they should spend this money or put it aside in savings for when it will be recouped next year. Things you should consider is your household income down due to COVID-19? Will it increase in January due to a military pay raise and is that increase enough to offset the money that will be recouped? Each situation is different so you must decide what makes the most sense for your household.
Application of the tax deferral process will be different for Active Duty, National Guard and Reserves as well as DoD Civilians. Service members and families can contact Financial Readiness staff at their installation Military and Family Support Center, or Military OneSource at 1-800-342-9647, if they need assistance in reviewing their Leave and Earnings Statements (LES) or have questions in planning for changes to their net take home pay.
Service members may view the Defense Finance and Accounting Service page for more information, Https://www.dfas.mil/taxes/Social-Security-Deferral/ and a list of Frequently Asked Questions, here. As more information is determined, updates will be posted on the site.
For more information, civilian employees may view the Defense Finance and Accounting Service page, https://www.dfas.mil/taxes/Social-Security-Deferral/ and a list of Frequently Asked Questions, here. As more information is determined, updates will be posted on the site. For civilian employees with concerns regarding withholding of the deferred OASDI tax, please consult with an Employee Assistance Program financial counselor.
President Trump has stated that if he is reelected, he will forgive the amounts owed but he only has the authority to defer collection of the tax in a national emergency. Congress has the authority to forgive the deferred amounts. The president has directed the Secretary of the Treasury Steven Mnuchin to work with Congress to pass legislation that would forgive the deferred amounts and pay back the Social Security Trust Fund.
Marguerite Cleveland is a freelance writer who specializes in human interest and travel stories. She is a military brat, a veteran and now a military spouse. Her military experience is vast as the daughter of a Navy man who served as an enlisted sailor and then Naval Officer. She served as an enlisted soldier in the reserves and on active duty, then as an Army Officer. She currently serves as a military spouse. She lives in the Pacific Northwest with her husband and two sons. Visit her website www.PeggyWhereShouldIGo.com