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IRS Employees Told They Can’t Opt Out of Payroll Tax Deferral

Posted on Sep. 8, 2020

IRS employees subject to President Trump’s payroll tax deferral order won’t be able to opt out, according to a September 4 human resources email to agency employees.

“Many employees have asked if there’s a way to somehow opt out of the deferral” of their 6.2 percent share of Social Security taxes that Trump’s order delays through the end of 2020, the IRS’s Human Capital Office said in the email obtained by Tax Notes.

“We have had many discussions with Treasury and they have confirmed that no eligible IRS employees can opt out since all Treasury payroll providers must adopt the deferral across the board,” the email continued. “We’ll provide more specificity on who is eligible along with Q&As next week.”

Trump’s August 8 executive memorandum directed Treasury Secretary Steven Mnuchin to allow employers to defer the withholding and payment of payroll taxes on compensation from September 1 through December 31. In guidance (Notice 2020-65, 2020-38 IRB 1) released August 28, the IRS said participating employers will be required to repay the deferred taxes during the first four months of 2021.

The National Finance Center, an agency of the Department of Agriculture that provides financial and administrative services to federal agencies, has said it plans to participate in the payroll tax deferral program. However, deferral has been a non-starter for most private employers.

The National Treasury Employees Union declined to comment on the IRS email, but it noted that union President Tony Reardon asked the Office of Management and Budget September 2 for “an immediate explanation” of when and how the deferral will affect union members’ pay.

However, the Professional Managers Association of nonunion employees at the IRS “strongly opposes the National Finance Center’s participation in this program,” the association’s national president, Chad Hooper, told Tax Notes.

IRS employees “should never be subject to the uncertainty of a costly tax obligation coming to them in 2021, just after the holidays and amidst a time of unimaginable financial hardship,” Hooper said.

“We are disappointed that the Department of the Treasury is willing to risk our careers to implement a policy which is not supported by the Congress, the private sector, or our employee unions,” Hooper said, noting that IRS employees are the only federal workers who can be fired for failing to pay tax promptly.

The IRS didn’t respond to a request for further comment by press time.

Dems Seek to Overturn

Congressional Democrats have been taking aim at Trump’s executive memorandum and the IRS’s subsequent guidance. A group of more than 20 Democrats on the House Ways and Means Committee, led by Social Security Subcommittee Chair John B. Larson, D-Conn., introduced legislation September 4 to overturn Trump’s order, along with a resolution of disapproval.

The legislation and resolution come two days after Senate Minority Leader Charles E. Schumer, D-N.Y., and Senate Finance Committee ranking member Ron Wyden, D-Ore., sent a letter to the Government Accountability Office to initiate an effort to overturn the IRS notice with a simple majority vote in the Senate.

The text of Larson’s bill — the Save Our Social Security Now Act — and of the resolution of disapproval was unavailable by press time.

While the Democrats are focused on overturning the payroll tax deferral program, Ways and Means ranking member Kevin Brady, R-Texas, has said he will introduce legislation to forgive the deferred taxes.

Wesley Elmore contributed to this article.

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