Trump's payroll tax deferral may lead to significant tax bills for workers, business groups warn
Trump announces plans to extend unemployment benefits, payroll tax cut to the end of 2020
President Donald Trump provides an update on his administration’s coronavirus response and the economy.
Business groups are asking the Trump administration to consider relief measures other than a payroll tax deferral, which they say could leave employees on the hook for large tax bills next year.
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The Chamber of Commerce and 30 trade associations sent a letter to Congress and the Treasury Department on Tuesday warning that a payroll tax deferral creates “a substantial tax liability for employees at the end of the deferral period.”
“Without Congressional action to forgive this liability, it threatens to impose serious hardships on employees who will face a large tax bill as a result of deferral,” the letter read.
PAYROLL TAX HOLIDAY: HOW MUCH COULD YOU SAVE?
The groups also included a chart that details how much workers could be on the hook for next tax season, ranging from around $751 for someone earning $35,000 to nearly $1,610 for someone earning $75,000.
Under those circumstances, the groups say many of their members would choose not to implement the deferral.
As previously reported by FOX Business, Trump plans to implement a payroll tax holiday from Sept. 1 through Dec. 30.
He has pledged to forgive deferrals if he is reelected – and even eliminate the tax entirely next year.
TRUMP PLANS TO TERMINATE PAYROLL TAX BUT WILL PROTECT SOCIAL SECURITY
The payroll tax is paid separately from federal income taxes and funds Social Security and Medicare. Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners.
The executive order applies only to the 6.2 percent Social Security obligation.
Trump has proposed implementing payroll tax deferrals for employees whose biweekly wages are less than $4,000, on a pre-tax basis.
For someone earning $30,000 a year, that amounts to around $155 a month in Social Security taxes, or $620 over four months.
For someone earning $50,000 a year, he or she would save about $258 a month and more than $1,030 from September through December.
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On the other hand, Trump’s presumptive Democratic opponent Joe Biden has a plan to implement payroll taxes on wages above $400,000. Currently, there is an adjusted wage cap set at $137,700. Wages between those two ranges would be exempt under Biden’s proposal.
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