SPRINGFIELD, Mo. (KY3) -President Trump signed an executive memorandum over the weekend to suspend the collection of payroll taxes for those making less than $4,000 every two weeks, which is around $104,000 per year.
With negotiations for another stimulus bill at an impasse, Trump issued a number of executive orders intended to help Americans who are financially struggling.
The one related to payroll taxes means that the money usually withheld from your paycheck to pay for Social Security won’t be taken out from September 1 through the end of the year.
So if you make $10 an hour and work 40 hours a week, you’ll save about $550 over that four-month period. If you make $15 an hour, you’ll pick up an extra $825 and if you make $25 an hour, you’ll have $1,375 in extra cash.
But there are a couple of catches you need to be aware of starting with the fact that you’ll still notice Uncle Sam is still taking money out of your paycheck.
”It’s not a deferral of ALL payroll taxes,” points out Joe LaTour, the Founder/President of LaTour Advisory Group in Springfield and Ava. “Your federal, your state, and your Medicare taxes are all still going to be coming out.”
And secondly, notice the use of the word “DEFERRAL”. Your payroll taxes for Social Security haven’t been cut or eliminated for good, just suspended for a period of time. Those taxes will still be owed at a later date unless the President can follow through on another promise he made after signing the order.
”If I’m victorious on November 3rd I plan to forgive these taxes and make permanent cuts to the payroll tax. I’m gonna make them all permanent,” he said.
But that won’t be easy because only Congress can do that.
“Because it was done by executive order the President is limited in his powers,” LaTour said. “Future rulings from Congress will determine if it is in fact forgiven. He is a man who wants to lower taxes and I think there’s a good chance it’s going to be forgiven. However, at this point all we know is that it’s a deferral and not a forgiven tax.”
Critics of the move point to the fact that unlike a stimulus check, the payroll tax referral doesn’t help the unemployed, retired, or stay-at-home parents who need it the most.
There are also definite concerns about how it will effect Social Security funding.
Treasury Secretary Steven Mnuchin said though that money will be transferred from the federal government’s general fund to Social Security.
So if you’re one of those getting extra money in your paycheck, what does a financial advisor suggest you do with it?
“If you need the money go ahead and use it for your living expenses,” LaTour said. “But if you’re one of those who’s still working and it’s not something you need to maintain your lifestyle, I would say lay it back because you’re going to have to pay it back unless they, with a future ruling, forgive it.”
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Things you need to know about new payroll tax deferral - KYTV
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