IRS issues guidance on Trump’s payroll tax deferral

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President Donald Trump speaks at a news conference in the James Brady Press Briefing Room at the White House, Thursday, Aug. 13, 2020, in Washington. (AP Photo/Andrew Harnik)

WASHINGTON (NewsNation) — The Internal Revenue Service has clarified how President Trump’s deferral of the payroll tax, which funds Social Security benefits, will be made up in 2021.

Trump issued a memorandum earlier this month to suspend the tax from Sept. 1 through the end of the year, under the reasoning that it would give Americans more money in their paychecks during the COVID-19 pandemic.

On Friday, however, the IRS said in a statement that companies that choose to defer payroll taxes will have to withhold double the taxable wages to make up for the shortfall.

That money will have to be paid between Jan. 1 and April 30. The statement adds that employers “may make arrangements to otherwise collect the total Applicable Taxes from the employee.”

The payroll tax deferral is applicable to employees earning less than $4,000 during a bi-weekly period.

The AARP sent off what amounts to a warning letter to the president, saying he needs to provide Americans with “a more complete explanation” of his plan.

“Suspending, reducing, or eliminating the contributions to Social Security made through the payroll tax will interfere with Social Security’s long-term funding stream,” wrote Jo Ann Jenkins, CEO of the seniors’ lobby. “The American public deserves to hear your plan on how you would replace that funding, and how people can count on receiving their hard-earned Social Security benefits.”

The Associated Press contributed to this report.

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