The Department of Treasury and the IRS released more information Friday regarding changes to Social Security withholdings.
Upholding a Presidential memorandum issued on Aug. 8, the agencies announced employers do not need to withhold Social Security taxes from checks for employees who make less than $4,000 every two weeks. That means most people who earn $104,000 or less will be eligible. Those who earn more than $4,000 on a bi-weekly basis will still be required to pay the taxes.
That applies to wages paid starting Sept. 1. The adjustment will be enforced through Dec. 31.
The move will increase wages earned and kept by many workers. The intent is for Americans to spend that additional money and stimulate the economy in the midst of the coronavirus pandemic.
Most Americans pay 6.2% of wages to the Social Security Administration. The temporary change means a person with $50,000 in annual earnings would expect to keep about $120 more per two weeks through the end of the year.
The executive order proposes an optional deferment, meaning employers and employees will still have to pay the taxes at some point by Tax Day in 2021.
A hypothetical worker making $75,000 a year would receive about $179 more every two weeks, but that same worker would owe about $1,610 next year. A worker making $35,000 would receive about $83 more biweekly for the rest of this year and owe just over $750 next year, according to The Associated Press.
“It makes clear that employees will be required to pay more taxes beginning in January to offset any benefit they receive now,” Neil Bradley, policy chief for the U.S. Chamber of Commerce, said Friday. “The only way to achieve a workable proposal is for Congress and the administration to come together and enact a change in the law.”
Cox Media Group