A bipartisan group of 43 House members Friday wrote to Treasury Secretary Steven Mnuchin urging the White House to allow members of the military and the federal workforce the flexibility to opt in or out of the payroll tax deferral created under President Trump’s August 8 executive order.
While the order allowed private sector employers to determine whether they would participate in the program, it made it compulsory for service branches and the federal workforce.
Secretary Mnuchin was asked in a hearing last week whether he was willing to grant the same choice to those collecting a government paychecks, and replied that doing so would be “reasonable.”
The House members wrote:
“We urge you to amend IRS guidance to allow military service members and federal employees the ability to choose whether or not their payroll tax obligations will be deferred under IRS Notice 2020-65.
“Feedback from civil servants and service members we represent indicates that the withholding of payroll taxes has been chaotic and confusing for many of those affected. There is widespread concern among the ranks of both groups that deferred payroll taxes will lead to increased tax bills in January and potentially even fees for those who are unable to repay deferred taxes.
“Federal workers and members of the military also report feeling unfairly singled out for mandatory payroll tax deferral. Private companies and business organizations were given the flexibility not to participate in the program, and have largely elected not to defer collection of payroll tax obligations. The United States Postal Service, likewise, exempted its employees from the policy. Presented with this contrast in a recent hearing, you responded that it would be “a reasonable issue” to allow federal employees and military service members the same flexibility that the Administration granted to the private sector. We applaud this sentiment, and ask that you put it into practice forthwith.”
Last month, the IRS informed the National Treasury Employees Union that the taxes are deferred if the gross salary is less than $3,999 after several pre-tax deductions are subtracted out, including health insurance premiums and deductions for flexible spending and health savings accounts. As a result, more federal employees are likely subject to the payroll tax deferral than originally anticipated.