Employers cast aside Trump’s tax holiday
Businesses decline to participate in executive order deferral
President Donald Trump’s fourmonth tax holiday during the COVID-19 pandemic went into effect Sept. 1, but it appears few, if any, employees in Northwest Indiana are seeing a short-term boost in take-home pay as a result.
From casinos to Realtors to government bodies, several employers in the Region contacted said they were not participating in the optional deferral program.
A few employers declined to comment.
None of the more than a dozen employers contacted said they would participate.
Those who did comment cited the fact that the tax break is just a deferral, which will have to be paid back later, as well as the cost and uncertainties that participating employers could face.
The program, made available through the president’s executive order, allows employers to suspend the employee’s Social Security portion of payroll taxes from Sept. 1 through Dec. 31. Employers must then pay back that suspended tax money to the government by April 30 or penalties, interest and additions to taxes will begin to accrue for any tax amount outstanding.
Anthony Sindone, clinical assistant professor of finance and economic development at Purdue University Northwest, said he doesn’t blame employers who decline to participate.
“It’s not just changing things once. It’s changing them twice,” Sindone said, speaking of how employers would deduct taxes from a paycheck.
“On top of that, it’s a deferment, not a holiday. At the end, employers will need to take out a big chunk of money,” Sindone said.
Sindone said the federal government will send the employer, not the employee, the bill.
Joe Wszolek, chief operating officer of Greater Northwest Indiana Association of Realtors, said while the organization is aware of the four-month deferral on Social Security tax deductions, GNIAR doesn’t have any employees participating in the deferral program and he is not aware of any member firms participating either.
“The deferral program is just that — while providing short term ‘relief’ from the collection of the tax the longer term view results in a higher tax collection beginning in 2021,” Wszolek said.
The local Realtor organization is following in the path of the National Association of Realtors, which was one of 33 national business organizations that together penned a letter to Senate Majority Leader Mitch McConnell, House Speaker Nancy Pelosi and U.S. Secretary of the
Treasury Steven Mnuchin urging them to instead work together to provide tax relief without the uncertainty associated with the tax holiday.
“Under current law, the (executive order) creates a substantial tax liability for employees at the end of the deferral period. Without Congressional action to forgive this liability, it threatens to impose serious hardships on employees who will face a large tax bill as a result of deferral,” the letter stated.
The organizations — which also include among others the U.S. Chamber of Commerce, National Association of Manufacturers and National Retail Federation — provided a chart that showed a person with an income of $50,000 a year would see an increase of $119.23 per bi-weekly pay period for the four months and a $1,073.08 tax bill due in April 2021. An individual earning $35,000 a year would see a pay bump of $83.46 biweekly and a tax bill of $751.15, according to the chart.
“Many of our members consider it unfair to employees to make a decision that would force a big tax bill on them next year. It would also be unworkable to implement a system where employees make this decision,” the letter stated, explaining why many of their members would likely decline the offer to participate.
Hobart Clerk-Treasurer Deborah Longer cited several reasons why the city decided not to offer the tax holiday to its employees, including having to purchase new software to accommodate the change, the uncertainty of whether it would have the new software in time and the fact that it would be cost prohibitive.
“It would cost us money to upgrade our software for certain people. Our financial software isn’t set up to do this. Also, it would take time to do this. I don’t know if it would be done in time,” Longer said.
Longer said the city could be liable for the difference if an employee quits before paying back the deferred money. Plus, the employee could end up in a situation where they owe a lot of money.
“In the long-run it doesn’t help the employee and it could put them in a situation of having the IRS after them,” Longer said.
She said only one employee asked if the city was going to participate in the deferral.
In its latter, the national organizations said they hope Congress and the Trump Administration come together on a solution that supports workers rather than saddling them with a large tax bill next year.
Sindone compared the tax holiday to rent deferments also taking place as a result of the COVID-19 pandemic.
“We’ll be in for a shock when all the deferments are lifted,” Sindone said, noting that all the deferred money will be due at once.