Donald Trump is giving workers a payroll tax holiday. It really does not mean much, but here is what it offers:
“Trump instructs the U.S. Treasury to halt collection of payroll taxes from Sept. 1 through Dec. 31 for workers who earn under less than $4,000 every two weeks (that’s people earning under about $104,000 a year).
This will feel like a tax cut for a few weeks because workers will end up with larger paychecks while the tax is not collected. But it is technically a tax deferral, meaning the taxes will still be due at a later date.” The Washington Post
So, if an employer stops withholding taxes under the terms of Trump’s executive orders, then it will feel like a tax cut for employees for a few weeks. However, there is a big caveat to all of this.
“…it’s unclear how many companies will want to suspend payroll taxes for employees only to have to pay them in 2021.”
Therefore, this tax holiday will probably have little or no impact. There are, moreover, a lot of small businesses who could not afford to stop withholding taxes knowing that the business will have to pay the taxes at a later date.
Who is going to want to suspend withholding taxes under these circumstances? The safer thing to do is to continue withholding taxes so they don’t accrue when they have to ultimately be paid.
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