Union urges Trump administration to make payroll tax deferral optional for federal employees

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The American Federation of Government Employees (AFGE) is urging the Trump administration to allow federal employees to choose whether to have their payroll taxes deferred.

In a letter sent Thursday to Office of Management and Budget Director Russel Vought, AFGE National President Everett Kelley asked that “employees be given the opportunity to opt in, rather than have participation be the default.”

“At a minimum, federal employees should have the ability to opt out of the deferral,” he said.

President Trump signed a memo last month directing the Treasury Department to allow employers to defer payment of employee-side Social Security payroll taxes through the end of the year. The IRS issued guidance last week providing that employers can stop withholding the taxes from Sept. 1 through Dec. 31 for workers making less than $4,000 biweekly, and then collect the deferred taxes by increasing the amount withheld from workers’ paychecks in the first few months of 2021.

Many employers in the private sector are expected to not participate in the payroll tax deferral because they don’t want their employees to see smaller than usual paychecks next year. However, the federal government is planning to defer its employees’ payroll taxes.

AFGE, which represents hundreds of thousands of federal employees, said that most federal agencies appear to be making the deferral mandatory for eligible workers. 

“Federal employees were given neither adequate notice nor adequate information regarding the tax deferral prior to its imposition,” Kelley wrote. “Few will be aware that they will be required to re-pay the deferred taxes during the first quarter of 2021 and able to plan accordingly.”

Kelley also said that the IRS’s guidance leaves many questions unanswered, including specifics about the collection of the deferred taxes.

“The [Social Security] tax deferral scheme has the makings of a fiasco for employees, employers and the IRS,” he wrote.

Another union representing federal employees, the National Treasury Employees Union, has also asked that the payroll tax deferral be optional for workers at federal agencies. 

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