Payback Deadline for Deferred Social Security Tax Extended
Payback Deadline for Deferred Social Security Tax Extended
With the passing of the Consolidated Appropriations Act of 2021 just last week, the major change affecting service members, federal employees, and their families is the extension for repayment of deferred payroll taxes.
Effective September 1, 2020, through a presidential order, military and federal employees’ paychecks presented a deferment of their 6.2% Social Security tax. Intended as a COVID relief measure, federal organizations participated in this deferment as a way to provide their employees with “a temporary boost in take-home pay for the remainder of the year.”
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Under normal circumstances, employers split the responsibility of the 12.4% Social Security tax with employees; with this order, the employer took on the full responsibility of that tax for their employees whose biweekly pay was below $4,000 pre-tax.
However, it was made very clear that employees would be responsible for paying their deferred amounts back come the new year. As one CNBC reporter compared, “This is a holiday in which the work continues to pile up on your desk when you’re gone, and you take care of it when you come back.” As many others said, it’s like kicking the can down the road. Many military and federal employees criticized the decision to force this into effect without the choice to opt out.
According to the Defense Financial and Accounting Service (DFAS), the original IRS guidance for repayment of the deferred 2020 Social Security tax read:
Military Members –
- For active duty military members, the total amount of 2020 deferred Social Security taxes will be collected evenly from pay between January 1 through December 31, 2021 (instead of January 1, 2021 to April 30, 2021).
- For reservists and guardsmen performing intermittent duty in 2021, the amount collected may not be the same every pay period. DFAS will collect 2% of net available from each weekly, mid-month and end-of-month pay, and will continue until the deferred taxes have been repaid in full.
- Beginning in January 2021, your myPay LES will reflect the monthly collection amount and contain a note in the remarks section that shows the remaining balance of deferred Social Security taxes.
Civilian Employees –
- The amount of Social Security taxes deferred in 2020 will be collected in 24 installments between pay periods ending January 16 and December 4, 2021.
- Beginning in January 2021, your myPay LES Remarks section will include the 2020 deferred OASDI collection amount in that pay period, as well as the remaining balance to be collected.
With the changes put into place by passing the Consolidated Appropriations Act, repayment of deferred payroll taxes will be extended to December 31, 2021, instead.
The deferred taxes will be deducted in even amounts over 12 months instead of only 4. While affected personnel will see smaller paychecks, this new plan will spread it out in an attempt to hopefully lessen the burden.
What this will look like on a check stub is a resumption of the normal 6.2% Social Security tax plus a percentage of previously deferred tax. For service members, who get paid on the 1st and 15th of every month, to determine the amount owed, follow this method:
- Log into the myPay website and navigate to the final 2020 Leave and Earning Statement (LES)
- Multiply 6.2% times the amount of basic pay received from September through December 2020
- Divide that number by 24. This will show the additional amount that will be withheld each paycheck for the year of 2021.
It should be noted, these calculations may not apply to those who are recently separated or retired, or for those who entered service during this deferment period.
All branches of service offer personal financial management programs if you are struggling to budget or are experiencing financial hardship:
- Air Force: Financial Readiness through Air Force’s Personnel Center (AFPC)
- Army: Financial Readiness Program (RFP)
- Coast Guard: Personal Financial Management Program (PFMP)
- Marine Corp: Personal Financial Management Program (PFMP)
- Navy: Personal Financial Management
Each base may also have their own specialized programs in addition to these.
>> Frustrated with your VA disability rating? Register for a free consultation for help with increasing your rating to get the compensation you deserve. Please go here.
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About the author
Lori Waddell serves as Co-director of an emergency response COAD in Montana, a freelance writer, and an Air Force Key Spouse. She is passionate about empowering communities and individuals through knowledge and resources. She currently lives in Montana with her husband and two children.
