WASHINGTON — With plans to put payroll taxes on ice for the rest of the year, Army finance officials warn Soldiers the tax breaks are temporary and will be collected starting in January.
In order to provide relief during the COVID-19 pandemic, a presidential memorandum was issued last month, followed by guidance from the Internal Revenue Service a few weeks later, to temporarily defer Social Security taxes.
Effective this month and through the end of calendar 2020, the federal government will defer the withholding of payroll tax in order to provide relief during the COVID-19 pandemic. Soldiers will be responsible to pay their deferred taxes between January and April 30, said Larry Lock, chief of Compensation and Entitlements for the Army’s G-1 office.
The Federal Insurance Contributions Act, or FICA, is the U.S. federal payroll tax and part of former President Franklin D. Roosevelt’s New Deal domestic program. It’s essentially a trust fund for American workers, with every paycheck taking 6.2% in gross wages for Social Security.
FICA taxes go into a government trust fund, which pays out to retired Soldiers and eligible beneficiaries. Soldiers need to understand their money goes back into the Social Security program come next year, Lock said.
So what does this mean for the Soldiers? According to the emergency declaration signed by President Donald Trump last month, individuals whose monthly basic pay is less than $8,666.66 will benefit from this deferral.
If the monthly rate of basic pay is at or above this threshold, the Social Security tax withholding will not be affected by the temporary deferral. This threshold was established by the Department of Treasury.
Soldiers with monthly wages under the threshold are not eligible to opt-out of the deferral, which will happen automatically. Soldiers will be responsible for the tax repayment in 2021.
As more information becomes available, it will be posted on https://www.dfas.mil/taxes/Social-Security-Deferral.