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Senators Urge Clarity on Payroll Tax Deferral Participation 

SEP. 8, 2020

Senators Urge Clarity on Payroll Tax Deferral Participation 

DATED SEP. 8, 2020
DOCUMENT ATTRIBUTES
  • Authors
    Van Hollen, Sen. Chris
    Collins, Sen. Susan M.
    Kaine, Sen. Tim
    Brown, Sen. Sherrod
    Baldwin, Sen. Tammy
    Warren, Sen. Elizabeth
    Merkley, Sen. Jeff
    Cardin, Sen. Benjamin L.
    Durbin, Sen. Richard J.
    Whitehouse, Sen. Sheldon
    Blumenthal, Sen. Richard
    Sanders, Sen. Bernie
    Wyden, Sen. Ronald
    King, Sen. Angus S., Jr.
    Carper, Sen. Thomas R.
    Murray, Sen. Patty
    Hirono, Sen. Mazie K.
    Duckworth, Sen. Tammy
    Reed, Sen. Jack
    Warner, Sen. Mark R.
    Schumer, Sen. Charles E.
    Sinema, Sen. Kyrsten
    Klobuchar, Sen. Amy
  • Institutional Authors
    U.S. Senate
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2020-34827
  • Tax Analysts Electronic Citation
    2020 TNTF 174-20

September 8, 2020

The Honorable Steven T. Mnuchin
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220

The Honorable Russell T. Vought
Office of Management and Budget
725 17th Street NW
Washington, DC 20503

Dear Secretary Mnuchin and Director Vought,

We urge you to let federal workers and uniformed service members choose whether to defer their payroll tax obligations under IRS Notice 2020-65, rather than forcing them to participate.1 Federal workers and service members should not be used as pawns for a payroll tax scheme that many private sector employers are unlikely to join and where key questions remain unanswered.2

While some federal employees may want to defer their payroll tax payments, unions representing federal workers have made clear that many others do not.3 IRS Notice 2020-65 does not answer many key questions, but KPMG concludes that it “appears” to give employers the option to, “Permit deferrals only at the employee's election.”4 PwC states that employers may want to provide this option to their workers, noting that, “The reduced take-home pay in early 2021 as a result of the additional withholding for the deferred Social Security tax may make some employees not want to participate in the deferral, even if their employer opts in.”5

Federal employees and service members lack basic information about how agencies will implement the payroll tax deferral. In addition to clarifying whether federal employees will be forced to participate, please answer the following questions:

1. If an employee or service member separates from their job prior to repaying deferred payroll taxes in their 2021 withholdings, will their employing agency or the IRS seek to collect unpaid payroll taxes from that employee? If so, how will they do so?

2. Please provide us with a cost estimate for federal agencies to pay the employee payroll taxes that they are unable to withhold or otherwise recoup as a result of the deferral.

3. How will federal agencies communicate key information about the payroll tax deferral to their workers, particularly regarding the reduction in take-home pay in 2021? As KPMG stresses, “It is important to manage employee expectations and keep employees informed of their obligations prior to making the election to defer.”6

Reports indicate that federal employee paychecks may be affected by the payroll tax deferral on or around September 18.7 Please respond to these questions as soon as possible so that federal workers and service members have some clarity on these issues before their paychecks are changed.

Sincerely,

Chris Van Hollen
United States Senator

Tim Kaine
United States Senator

Tammy Baldwin
United States Senator

Jeffrey A. Merkley
United States Senator

Richard J. Durbin
United States Senator

Richard Blumenthal
United States Senator

Susan M. Collins
United States Senator

Sherrod Brown
United States Senator

Elizabeth Warren
United States Senator

Benjamin L. Cardin
United States Senator

Sheldon Whitehouse
United States Senator

Bernard Sanders
United States Senator

Ron Wyden
United States Senator

Thomas R. Carper
United States Senator

Mazie K. Hirono
United States Senator

Jack Reed
United States Senator

Charles E. Schumer
United States Senator

Amy Klobuchar
United States Senator

Angus S. King Jr.
United States Senator

Patty Murray
United States Senator

Tammy Duckworth
United States Senator

Mark R. Warner
United States Senator

Kyrsten Sinema
United States Senator

FOOTNOTES

1IRS Notice 2020-65. Available at https://www.irs.gov/pub/irs-drop/n-20-65.pdf.

2Tony Romm and Eric Yoder. “Federal workers will have taxes deferred under Trump's order, sparking outcry they're being treated as a 'guinea pig'.” Washington Post. September 2, 2020. Available at https://www.washingtonpost.com/us-policy/2020/08/31/payroll-tax-trump-federal-employee/?hpid=hp_hp-more-top-stories_fed-taxes-410p%3Ahomepage%2Fstory-ans.

3AFGE. “President Trump's Payroll Tax Deferral is Scam That Will Leave Workers with Substantial Tax Bill Next Year, AFGE President Says.” August 31, 2020. Available at https://www.afge.org/publication/president-trumps-payroll-tax-deferral-is-scam-that-will-leave-workers-with-substantial-tax-bill-next-year-afge-president-says/; NTEU. “NTEU Statement on Payroll Tax Deferral.” September 1, 2020. Available at https://www.nteu.org/media-center/news-releases/2020/09/02/payroll-tax-statement; IFPTE. “IFPTE Urges Congress to Block "Irresponsible" Federal Employee Payroll Tax Deferral.” September 1, 2020. Available at http://www.ifpte.org/news/details/IFPTE-Urges-Congress-to-Block-Irresponsible-Federal-Employee-Payroll-Tax-Deferral.

4KPMG. “KPMG report: Initial analysis of Notice 2020-65, guidance on employee payroll tax deferral.” August 31, 2020. Available at https://home.kpmg/us/en/home/insights/2020/08/tnf-kpmg-report-initial-analysis-of-notice-2020-65-guidance-on-employee-payroll-tax-deferral.html.

5PwC. “Treasury issues limited employer guidance on optional deferral of employee Social Security taxes.” August 31, 2020. Available at https://www.pwc.com/us/en/tax-services/publications/insights/assets/pwc-employer-guidance-on-deferral-of-employee-social-security-taxes.pdf.

6KPMG. “KPMG report: Initial analysis of Notice 2020-65, guidance on employee payroll tax deferral.”

7Romm and Yoder. “Federal workers will have taxes deferred under Trump's order, sparking outcry they're being treated as a 'guinea pig'.”

END FOOTNOTES

DOCUMENT ATTRIBUTES
  • Authors
    Van Hollen, Sen. Chris
    Collins, Sen. Susan M.
    Kaine, Sen. Tim
    Brown, Sen. Sherrod
    Baldwin, Sen. Tammy
    Warren, Sen. Elizabeth
    Merkley, Sen. Jeff
    Cardin, Sen. Benjamin L.
    Durbin, Sen. Richard J.
    Whitehouse, Sen. Sheldon
    Blumenthal, Sen. Richard
    Sanders, Sen. Bernie
    Wyden, Sen. Ronald
    King, Sen. Angus S., Jr.
    Carper, Sen. Thomas R.
    Murray, Sen. Patty
    Hirono, Sen. Mazie K.
    Duckworth, Sen. Tammy
    Reed, Sen. Jack
    Warner, Sen. Mark R.
    Schumer, Sen. Charles E.
    Sinema, Sen. Kyrsten
    Klobuchar, Sen. Amy
  • Institutional Authors
    U.S. Senate
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2020-34827
  • Tax Analysts Electronic Citation
    2020 TNTF 174-20
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