Military members and federal civilians would see a significantly smaller bite into their paychecks come January under a provision that would stretch the repayment of deferred payroll taxes to 12 months instead of four months.
The provision is included in the omnibus spending bill expected to be voted on later today. The bill includes pandemic relief and federal spending.
Under guidance from the Internal Revenue Service, defense officials were set to start collecting deferred Social Security payroll taxes from troops’ paychecks in January over a four-month period through April — paying back the extra money that troops received in their paychecks from September through December.
Now that payback would be stretched over 12 months, to Dec. 31, 2021, so the decrease in the paycheck would be one-third of what was previously scheduled.
In August, President Donald Trump signed an executive order requiring the temporary deferral of Social Security payroll taxes for military members and federal civilian employees, from September through December. While that has meant extra money in troops’ paychecks for four months, they must now pay those taxes back.
The move was designed to put more money into the pockets of employees, at least temporarily, to ease the economic pain caused by the pandemic. The payroll tax is 6.2 percent of basic pay. Troops will be paying that tax back, in addition to the resumption of the regular payroll taxes.
The amount varies. For example, an active-duty E5 with eight years of service was receiving an extra $205 a month with the tax deferral. Instead of paying back $205 a month over four months, the E5 would be paying back about $68 a month over 12 months, depending on when the repayments start in January.
Federal employees and service members will be able to extend payments back to Social Security over 12 months, rather than the initial four-month timetable
Rep. Don Beyer, D-Va., an outspoken critic of the tax deferral policy, hailed the inclusion of that provision, saying it will alleviate the burden on military families and federal workers. “Our payroll tax fix will help lessen the damage of Donald Trump’s payroll tax scam for military families and civil servants by minimizing the drop they see in individual paychecks,” said Beyer, who helped secure the fix.
He was an earlier support of legislation to block the tax deferral policy, which was mandatory for military and federal civilians. They didn’t have the option to opt out of the deferral.
The provision is in Section 274 of the legislation.