Clarification on Payroll Tax Option’s Impact on Social Security
President Trump’s August 8 directive to the U.S. Treasury to allow employers the option to defer payroll taxes for the period of September 1, 2020, through December 31, 2020 has generated quite a bit of media rhetoric about its impact on the already precarious fiscal health of Social Security’s trust funds. The move has even worked its way into presidential election campaign territory, where it’s been characterized as an indication of what’s ahead for the future of this vital social program. So, in the midst of conflicting opinions of what exercising this deferral option would mean to Social Security’s funding, at least in the short term, the U.S. Treasury has issued a clarifying statement.
Basically, the Treasury’s position is summed up via this statement: “We do not expect deferral to impact the Social Security Trust Funds because the deferral is temporary and all deferred taxes must be repaid.” Citing the absence of reliable information on the use of this option by employers, and noting that the fund transfer schedule in now effect was developed in advance, the statement confirms that fund transfers from Treasury to Social Security will continue as planned. The statement reiterates the point that any deferred payments remain due to Social Security during the first four months of 2021.
As noted in yesterday’s headline article on this site, the response to the payroll tax deferral option has been met with some skepticism, adding credence to Treasury’s hesitancy to attempt changes to the pre-established fund transfer schedule. In any event, yesterday’s Treasury statement, which you can access here, serves to at least clarify the near-term impact on Social Security funding. Further action on payroll tax issues and Social Security is likely to remain dormant until post-election.
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