National Finance Center to implement Trump’s payroll tax deferral on fed paychecks
- By FederalSoup Staff
- Aug 28, 2020
The National Finance Center (NFC) at the Department of Agriculture said it plans to eliminate deductions for Old Age, Survivors and Disability Insurance from federal employees’ paychecks in accordance with the president’s Aug. 8 executive order deferring employees’ OASDI deductions as a form of tax relief and economic stimulus.
OASDI, according to the Social Security Administration, is virtually synonymous with Social Security, which supplies “monthly benefits designed to replace, in part, the loss of income due to retirement, disability, or death.” It is financed by workers who contribute to the program through a payroll tax that is levied under the Federal Insurance and Self-Employment Contribution Acts.
The news was first reported on TaxNotes.com.
In an Aug. 21 memo, NFC said it is preparing to make “system modifications” to its payroll and personnel system to eliminate the OASDI deductions for all employees whose gross Social Security wages are less than $3999.99 per bi-weekly pay period. The change will be effective with the 17th pay period, which is the first after Sept. 1, NFC said. The president’s order calls for the tax deferral to continue through Dec. 31, after which employees will likely be responsible for repaying the deferred taxes.
The memo concludes by reminding NFC customers that “the executive order refers to the fact that this is a deferral of the deductions, and Treasury should look to have legislation put in place so that employees do not have to pay back these deferred amounts.”
Although the executive order calls for the Treasury Department to issue implementation guidance, sources contacted by TaxNotes said no such guidance has been released.
Samantha Jacoby of the Center on Budget and Policy Priorities told TaxNotes that agencies would likely face the same implementation challenges private-sector business have, adding that there also likely be “‘substantial confusion among federal employees,’ who don’t appear to have any option to continue having their payroll taxes withheld, at least according to the National Finance Center notice.”
NFC said it would provide additional information as it becomes available.