CHARLOTTE — President Donald Trump signed executive orders last month for a deferment on payroll taxes, meaning your employer can stop collecting the payroll tax for the rest of the year.
The “payroll tax holiday” will affect Americans making less than about $100,000 annually and will be in effect from Aug. 1 through the end of 2020. Trump said if he is re-elected in November, he may seek to extend the deferral and “terminate” the tax.
The tax funds Social Security and Medicare benefits.
“This will mean bigger paychecks for families,” Trump said.
>> In the video at the top of this webpage, Action 9′s Jason Stoogenke breaks down what the payroll tax deferral means for you.
On Tuesday, Channel 9 learned that the city of Charlotte would not be participating in the program. Below is the letter that was sent to city employees:
“On August 28, 2020, employers received administrative guidance regarding President Donald Trump’s Executive Order that was announced on August 8, 2020. The tax deferral allows employers to defer the employees' 6.2% Social Security tax deduction between September 1st and December 31st, 2020. This is a deferral, not a permanent tax break and comes with ramifications. Under this plan, the employee will be required to repay the full amount of deferred taxes between January 1st and April 30th via payroll deduction. That means the employee could be required to pay an additional 6.2% in past due social security taxes for the first four months of the year. Taxes that go unpaid by April 30, 2021 are subject to interest, penalties, and late fees. This notice is to inform you that the City of Charlotte will continue to withhold payroll taxes and will not be participating in this payroll tax deferral.”
The state of North Carolina and Mecklenburg County have also decided not to participate in the payroll tax deferral.
Here’s what you need to know about the payroll tax deferral:
- Employers have the option to opt-in or not.
- If your company opts in, you’re still only eligible if you make less than $2,000 per week before taxes. Put another way, you’re eligible if you make less than $104,000 per year.
- If so, you’ll get to keep more money in your paycheck for the rest of the year. But there’s a big catch: Next year, your employer would take out double the payroll tax between January and April (For example, if you make $35,000 per year and get paid every two weeks, you’ll save about $83 in each check until the end of the year. But then your employer will have to take out about $750 extra from your paychecks the first four months of 2021).
- Even if your company opts in, you may be able to opt-out. It all depends on your company, so ask.
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