As part of the economic relief efforts targeted towards helping people recover from the ongoing COVID-19 outbreak, the President recently issued an executive order declaring a Payroll Tax “Holiday.”

However, it’s not a true Holiday – yes, you may see more money in your paycheck, but you will have to pay that money back. Here’s more information on what the holiday actually means, and how you can plan if you live in the area of Flower Mound TX.

The Executive Order

In August, President Trump issued four Executive Orders that specifically addressed a variety of economic issues. One of those orders was what he and his team termed as a Payroll Tax “holiday.” It allowed employers to suspend payroll taxes from September 1 – December 31. This only applies to employees who earn less than $104,000 or less than $4,000 for a biweekly basis.

This would, in theory, increase the amount of take home pay for employers who opted into the deferral. However, it is not a mandatory holiday – an employer has to go out of their way to opt-in to the holiday. For many reasons, quite a few employers are not taking advantage of this deferral program.

You Will Have To Pay It Back

There is a vital point to understand about this reduction in your taxes: If your employer opts into receiving it, you will have to pay this money back.

That is because the President cannot unilaterally cut taxes – only Congress can do that. As such, this “holiday” is being viewed as a deferral of taxes, not a complete amnesty program. This means that employers and employees will have to pay the money back, and that would mean that taxes would be increased after December 31 in order to pay the money back.

This can potentially create a very nasty surprise for many employees who didn’t realize that the deferral was temporary, not permanent, and again, this helps to explain why some employers have decided that the deferral is not worth it. If you are looking to take advantage of this program, make sure to speak with an accountant and clearly communicate what is happening with your employees.

If you are looking for the best tax services in the Flower Mound TX area, look no further than Master Plan Tax Services. Our vision is to help you manage your taxes, bookkeeping, payroll, and more, ensuring that you have time to concentrate on your business. If you have any questions about the Payroll Tax Holiday, or any other tax issues, call us today at 682-444-PLAN.

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