Well,to those who are not properly known to the term, payroll tax is a percentage withheld from an employee’s pay by an employer who pays it to the government on behalf of the employee.
This tax is based on the wages,salaries and tips paid to the employees. Being deducted directly from the employees earnings,this tax is paid to the Internal Revenue Service(IRS).
In US however, payroll taxes are used to fund Social Security and Medicare.
Now,if your employer stops withholding Social Security taxes on your paycheck then according to new guidance, the employers that don’t withhold payroll taxes between Sept-Dec 2020 will be responsible for withholding those taxes during the first four months of 2021.
So, at this point,you ,like many others, might be thinking that if there is a way in then there might be a way out.
Based on researches this far, you can consider this few tips which will not completely but to some extent reduce your pain of getting smaller paycheck and bigger tax bills in these months.
For payroll taxes to get paid,employers would not require to stop withholding the Social Security so, on the first place it should not be a matter of concern for you but if in any way your employer does decide to stop withholding payroll taxes then it should be your call to ask your employer if you have the option to continue having the money withheld from your paycheck.
It is not sure if you would be able to choose as according to some researches, the NFS has said that it would defer the taxes for all eligible employees and didn’t mention any ability to opt out but asking for it to your employer on the first place is not a bad idea.
2.If after asking,your employer does implement the changes, you should not spend that off. Try setting up an automatic transfer to your bank account each pay day for the amount that is no longer being withheld.
That amount you save will surely come to use when your lower paycheck arrives the following month.
what you should do is set up a separate account from your regular savings account or the account where you keep your emergency fund and do not mix them up.
You can also ask your employer to withhold more money from your paycheck by filing a W-4 . Though this would not stop your employer from withholding extra payroll but it will surely increase your tax refunds and if you file early enough,you will be able to use that money to make up for your temporary cut.
Spend your money assuming that you would have to pay it back .i.e.,assume that you will pay back an extra money you recieve in the form of lower pay next year. So, you can save yourself by not spending or investing your money in any way and keep it safe in your account assuming that it belongs to someone else.
Following this tips can surely help you out until the next laws or further details regarding payroll tax is made public or reinforced by the government.
