Payroll tax holiday how does it work

Employees who partake in the payroll tax deferral would enjoy a temporary boost in their take-home pay for the remainder of the year. However, they will see smaller paychecks early next year as employers withhold and pay the deferred amount to the IRS. VIDEO 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.

The impact on workers' take-home pay could be significant. Invest in You: Ready. Workers looking for guaranteed retirement income. Sharon Epperson. Financial advisors feel pull of cryptocurrency wave as more clients express interest. Lorie Konish. More financial advisors using cryptocurrency in portfolios. Read More. The holiday gives employers the ability to temporarily defer a portion of employee payroll taxes.

The payroll tax holiday allows businesses to not withhold employee Social Security taxes between Sept. Employers must pay the deferred taxes between Jan. Originally, the deadline to pay was April 30, Employers are still responsible for paying Medicare payroll taxes and the employer portion of Social Security payroll taxes.

The IRS issued a notice on Jan. Your employer can make the decision to participate or not, so employees can check with their employers to understand what it means to them. Typically, employees and employers each pay half of the total That means the payroll tax deferral temporarily stops the 6. Under this stimulus plan, employers may choose to pause withholding the 6.

The reasoning behind this plan is that when employees receive a temporary increase in their paychecks, it will help them spend on items they need, and keep the economy humming along when people might need the funds the most. Read the full wording of the legislation. With so many questions about this stimulus program, assembled here are 5 key questions to keep in mind about the Payroll Tax Holiday, including how this stimulus program might impact your budgeting and financial health. To manage the stimulus program so it works for you, make a plan to manage the extra bit of cash you get this fall, take into consideration your full financial picture, and be ready to prepare for repayment of the deferred taxes when they come due.

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