Photo by Olga DeLawrence

The Taxman (Doesn’t) Cometh

If you haven’t heard, soldiers’ pay is ruined. At least, that was the initial reaction on social media to President Donald Trump’s payroll tax deferral plan forced on the federal workforce, including the military.

Starting in September’s mid-month pay period, soldiers who make less than $8,666 per month in base pay will keep the 6.2% of their income normally withdrawn for Social Security (labeled “FICA-SOC SECURITY” on monthly earnings statements). These taxes will not be deducted through December.

Great! Extra pay, right?

Not quite.

Starting in January, servicemembers must pay the taxes back. The Internal Revenue Service’s guidance is for the deferred taxes to be withdrawn from paychecks from January 1 to April 30, 2021.

The deferral is meant to provide financial relief from the economic impacts of the Covid-19 pandemic. However, the deferral seems out of touch with reality. Military pay has so far been insulated from the negative economic impacts of Covid-19.

There was speculation from some on social media that the deferral was a political sleight of hand to boost the president’s polling with servicemembers who see more money in their paycheck before the November election.

If he wanted to reassure the public that this was not a political stunt, President Trump didn’t do himself any favors.

“When we win I, as your President, will totally forgive ALL deferred payroll taxes with money from the General Fund. I will ALWAYS protect Seniors and your Social Security! Sleepy Joe Biden will do the opposite, he will raise your taxes and DESTROY our Country!” he tweeted.

The deferral could have negative consequences for some servicemembers. If they are uninformed, they may see extra pay in their account over the next three months and establish a new baseline for spending. Then, when January comes, they will see a sharp increase in payroll taxes withdrawn — from 0% in December to the standard 6.2% plus the payback.

The best way to address this is to talk to soldiers if you are a leader. There is no option to opt-out, so the only mitigation available is to ensure everyone understands what will happen to their pay from now until April.

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The views expressed are those of Brennan Randel and do not reflect the official position of the Department of the Army, Department of Defense, or any government agency.

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Brennan Randel

Brennan Randel

38 Followers

“To avoid criticism, say nothing, do nothing, be nothing.”