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House Ditches Payroll Tax Deferral for Staff; Senate Undecided

Posted on Sep. 14, 2020

Federal agencies may be applying President Trump’s payroll tax deferral to their employees, but that won’t be the case for some congressional staff.

Implementing Trump’s temporary deferral of the 6.2 percent employee share of payroll taxes “would not be in the best interests of the House or our employees,” House Chief Administrative Officer Philip G. Kiko said in a September 11 memo, noting that the taxes would still have to be collected next year.

According to Kiko, the House Administration Committee affirmed the decision. “As a result, we will not implement the payroll tax deferral,” he wrote. The Office of the Chief Administrative Officer administers payroll and benefits for House lawmakers, committees, officers, and their staffs.

Meanwhile, the Senate has yet to take a stance on deferral. Sydney Butler, a spokeswoman for the Senate Office of the Secretary, told Tax Notes in a statement that no decision about whether the Senate would follow suit has been made. The Disbursing Office, which handles payroll for the Senate, is still reviewing Treasury’s guidance on the memo, consulting with stakeholders, and “actively working with the Senate’s software provider to determine the exact course of action the Senate will take,” she said.

Butler added that Senate employees’ paychecks would not be adjusted without prior notice.

Trump signed an executive memorandum August 8 directing Treasury to defer the withholding and collection of the 6.2 percent employee share of payroll taxes from September 1 through December 31 for eligible employees. Subsequent guidance has made clear that the deferral is optional for private sector employers but mandatory for executive branch employees.

Seth Hanlon of the Center for American Progress praised the decision by the House and urged the Senate to follow suit, warning that if the Senate opts to implement the deferral, it will have to reckon with some complicated scenarios.

For example, if the Senate defers its employees’ payroll taxes through December 31, and a senator’s term comes to an end, that senator’s departing staffers would come off the Senate payroll on January 3, the Senate’s swearing-in date, or earlier, Hanlon said. He noted that the Treasury guidance stipulates that deferred taxes will be recouped ratably from employees’ January through April paychecks, and that employers are to “make arrangements” with their employees for repayment if necessary.

“Perhaps they could take the entire amount out of their last paycheck — but what if it’s a partial paycheck and not enough to cover the deferred tax?” Hanlon wondered. “The employee would remain on the hook for the tax, but that could be costly and difficult for the IRS to collect.”

Follow Jonathan Curry (@jtcurry005) on Twitter for real-time updates.

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