Millions of working Americans have had their payroll taxes deferred starting in September. This is going to end at the end of December (this month). The important thing for everyone is to recognize that this is a deferral, meaning you will have to pay the deferred payroll taxes back starting in January 2021. The payback of the deferred money is scheduled to be completed from January to April 2021.
Basically, this means you’ll be paying double or near double payroll taxes for the first four months of 2021. This is certainly not ideal, but if you participated in the payroll tax deferral, voluntarily or not, your paychecks may be significantly lower starting with your first paycheck in 2021. Payroll taxes are usually 6.2%, but that could be doubled to 12.4% for the first four months of 2021.
This deferral affected earners who make up to $4,000 on a bi-weekly basis or salaried employees with a salary of $8667 or less per month. For an earner at the upper limit of the payroll tax deferral ($8667/month), they would normally pay $537 per month in payroll taxes. If they had these taxes deferred, they will now have to pay back the four months of payroll tax deferrals, and they will pay $1074 per month from January through April. Below is a table breaking down the payback amount for based on income level.
The program is coming to a close at possibly the worst time of year for many. Do your best to plan around this to minimize the effects of smaller paychecks from January through April.
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