Tax deferral plan steams ahead

The Trump administration isn't backing off a plan to stop withholding Social Security tax from the paychecks of federal employees earning less than $104,000 annually for the rest of calendar year 2020.

The plan, part of a broader administration effort to encourage companies to withhold payroll tax collection on a voluntary basis to inject more cash into the reeling U.S. economy, has drawn criticism from federal employee unions and lawmakers because of the potential tax crunch facing feds in 2021 when the deferred tax bill comes due.

Under a White House executive order, the tax deferral period kicked off Sept. 1. Many federal employees will see the changes beginning with pay periods that started last week. According to reporting in the Wall Street Journal, Bloomberg and elsewhere, few large public companies are opting to participate in the tax deferral scheme.

Mike Rigas, the acting deputy director for management at the Office of Management and Budget and the acting director of the Office of Personnel Management, issued a memo on Sept. 11 advising each agency to "coordinate with its payroll provider to disseminate information to employees, and to answer questions they may have."

Rigas also said that President Donald Trump and the administration are lobbying Congress to make the tax deferral permanent, so that federal employees aren't on the hook for the 6.2% of earnings that are normally withheld from paychecks to cover Social Security.

Rep. Kevin Brady (R-Texas) introduced a bill last Friday to designate a temporary payroll tax holiday so that feds and others participating in the deferral program won't have the pay back the taxes. Many members of Congress, mostly Democrats, have urged the Trump administration to make the tax deferral optional for federal employees and the uniformed military.

The Defense Department reminded service members and civilian employees last week that under the plan, deferred taxes will be collected in 2021.

Employees of the House of Representatives won't be participating in the tax deferral. Philip Kiko, the chief administrative officer of the House, told employees in a "dear colleague" letter that "implementing the deferral would not be in the best interests of the House or our employees."