TTTT Episode #10 Tax Impact of Trump's Executive Order

On Saturday August 8th, President Trump issued an executive order directing a deferral of certain payroll taxes beginning on September 1.  The order applies to employees making less than $8,680 monthly in pre-tax wages. 

 

Payroll tax generally refers to the tax on wages for social security and medicare.

Under a previous order, employers were authorized to defer depositing their portion with the IRS.  The new order is not sufficiently detailed to conclusively say how employers should react or to determine if employees are receiving a tax deferral or a tax cut.  A tax deferral will have to be repaid at a later date.  A tax cut would result in employees having more take home pay, but must be authorized by Congress rather than by executive order.

As I have discussed previously, payroll tax is nothing to mess around with.  Before taking any action to adjust withholding employers should seek additional guidance from the IRS.   If you are an employee and begin to receive additional take home pay from your employer under the executive order, then you must assume you will have to repay the taxes until Congress passes legislation to turn the tax deferral into a tax cut.