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Many Employers Say Temporary Tax Break Is Not Worth The Trouble

MARY LOUISE KELLY, HOST:

Starting tomorrow, some workers may get a boost in their take-home pay. That's because the Trump administration has given employers the option to stop collecting payroll taxes through the end of this year. The windfall is only temporary, though. Unless Congress decides to forgive the taxes, employees will have to repay the money next year. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: President Trump ordered this tax break after failing to strike a broader coronavirus deal with Congress. He characterized it as an effort to put more money in the pockets of hardworking people.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: This will mean bigger paychecks for working families as we race to produce a vaccine.

HORSLEY: But new guidance from the IRS makes clear the bill for this temporary gift comes due next year. Employees who don't pay the tax for Social Security this fall will have to pay double next winter. Democratic Congressman Don Beyer of Virginia calls that a gimmick.

DON BEYER: I don't want to be the one handing out the paychecks in 2021 when people find that not only do they have to pay Social Security again, but they have to pay it twice for all the things that they didn't pay in the last part of 2020.

HORSLEY: Trump is hoping Congress will simply waive the payroll tax. Lawmakers did waive part of the tax temporarily during the Obama administration. But Beyer, who's vice chairman of the Joint Economic Committee, warns Trump's proposal would leave a big hole in Social Security, which the 6.2% tax helps pay for.

BEYER: We need to shore up Social Security, and the last thing we want to do is undercut it.

HORSLEY: Businesses also worry that if an employee pockets the extra money this fall, then quits or gets fired before it's repaid, the employer could find itself on the hook for the taxes. Vice President Pete Isberg of the payroll processing firm ADP says it's a lot for companies to think about, and the last-minute timing of the IRS guidance before the September 1 effective date didn't help.

PETE ISBERG: After 5 p.m. on Friday the 28 gave us exactly one business day to respond to it.

HORSLEY: The U.S. Chamber of Commerce and dozens of trade groups have called the president's plan unfair and unworkable and say many of their members will simply keep collecting payroll taxes as they always have. But hundreds of thousands of federal employees will stop having the tax withheld from their paychecks this coming month. Those workers might want to be careful about what they do with the extra money.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

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