If your boss stops FICA withholding, you’ll still owe those taxes.

Yes, it’s complicated. It’s not what it seems.

This article contains news with anti-Trump commentary.

Companies can stop withholding FICA taxes for most workers on September 1, 2020, but don’t have to, and if they do, workers must pay those taxes by April 30, 2021, the IRS says. Read story here.

It’s an attempt by Trump to deceive workers into thinking he’s giving them a tax break heading into the election. But he can’t eliminate these taxes. His authority is limited to suspending collection of these taxes. Employers and employees will still owe them.

He’s promised to forgive those tax debts, but only Congress can do that. Democrats will oppose it, because that would defund Social Security and Medicare, which might have to stop paying benefits within a year or two. Congress theoretically could replace that money from other taxes, but Senate Republicans might block that, so House Democrats are unlikely to go along with waiving the FICA taxes.

Meanwhile, Republicans are still blocking a large Covid-19 relief bill that would provide businesses and individuals much more help than Trump’s payroll tax shenanigans, which do nothing at all for the unemployed. Economists expect unemployment to remain above 10% into next year, matching the worst levels of the 1981 and 2009 recessions.

Millions of senior citizens, some of whom voted for Trump in 2016, have no other income or health care. They will be in a severe lurch if those benefits end. According to polls, Trump’s support has fallen in this group, and he can ill afford to lose more of their votes, so he must be counting on their not realizing the financial risk he’s imposing on them with this move.

It remains to be seen how many business will stop withholding payroll taxes under Trump’s executive order. They’ll have to make it up next spring by withholding more, but if employees are laid off or quit before then, their employers could get stuck with the bill. Numerous business groups and large corporations have expressed reservations about the scheme, so it won’t be surprising if business participation is very low.

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0 Comments Add Yours ↓

  1. Mark Adams #

    In politics often it is the appearance of doing something while actually doing nothing that is important. I doubt many companies will do what Trump has allowed here, but to workers it will not be Trump that is at fault, it will be their companies CEO. Of course what he did is meant to pressure and influence members of Congress of both parties to put something on the mans desk.
    This is a very clever political move, yet I am supposed to believe Trump is a rube, is dumb, not sophisticated, doesn’t understand the levers he can pull, and not a politician.

  2. Roger Rabbit #

    I haven’t seen him described as a rube, dumb, or unsophisticated. I HAVE seen him described as dishonest and corrupt, a cheat and a liar, a swindler, and a demagogue, among other things and frankly, I don’t understand how anyone can vote for him.