By Brittany De Lea FOXBusiness
The notice does not indicate deferred payments will be forgiven.
The Treasury Department on Friday night released guidance related to President Trump’s payroll tax deferral, which is scheduled to begin next week.
The guidance allows employers to defer payroll tax withholdings for employees with incomes below $4,000 during a bi-weekly pay period, calculated on a pre-tax basis, or the equivalent.
The deferral period will be Sept. 1 through Dec. 30.
According to the guidance, the taxes are deferred until a pay period beginning on January 1.
Trump, however, has said he will forgive those deferrals, rendering the measure a true payroll tax holiday. If he does not, employees could be on the hook for a sizable tax bill next year.
The U.S. Chamber of Commerce cautioned that workers could owe amounts ranging from around $751 for someone earning $35,000 to nearly $1,610 for someone earning $75,000.
In the event that deferrals are not forgiven, interest and penalties would begin accruing on May 1.
TRUMP’S PAYROLL TAX DEFERRAL MAY LEAD TO SIGNIFICANT TAX BILLS FOR WORKERS, BUSINESS GROUPS WARN
Businesses may opt-out of the deferral altogether because of how tight the turnaround would be.
Pete Isberg, vice president of government relations for payroll processing firm ADP, told FOX Business that this sort of process normally takes months.
“It’s unlikely that many employers will be able to make the programming changes by Sept. 1,” Isberg said. “We’ve advised Congress and Treasury that anything like this normally requires at least six months for an orderly programming transition.”
The payroll tax is paid separately from federal income taxes. It funds Social Security and Medicare. Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners.
The executive order applies only to the 6.2 percent Social Security obligation.
