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THREAD: Here's some advice about how to manage your personal finances if your employer (probably the federal government) is doing the payroll tax deferral. 1/
First, let's distinguish the taxes being deferred. The deferral applies to Social Security payroll taxes (might show as FICA on your paystub). It has nothing to do with the income taxes for which you file a tax return each year.
So no need to change income tax withholdings. 2/
So no need to change income tax withholdings. 2/
If your employer does the payroll tax deferral, your take-home pay will be larger now, and smaller in early 2021.
If you have enough money in your bank account, my advice is to do nothing. It'll all even out, and you'll get a few more cents of interest in your bank account. 3/
If you have enough money in your bank account, my advice is to do nothing. It'll all even out, and you'll get a few more cents of interest in your bank account. 3/
If you are paycheck-to-paycheck, then start setting aside some extra money now, because you'll need it when your employer increases your payroll deductions to pay back the deferral in 2021. Just save whatever amount your take-home pay increases by after the deferral starts. 4/
If you have credit card debt, consider using the extra money from the payroll tax deferral to pay that down. You're likely paying very high interest, so that might save you some money. Just know you may go back into credit card debt when the deferral has to be repaid in 2021. 5/
If you leave your job, your employer and/or the IRS may try to recoup the deferred payroll taxes from you.
It's unclear how this will work. Total mess.
Set aside some money just in case if you think you might leave your job before April 2021. 6/
It's unclear how this will work. Total mess.
Set aside some money just in case if you think you might leave your job before April 2021. 6/
The main thing you shouldn't do: Do not increase your spending habits because of the payroll tax deferral. It's temporary and has to be repaid. 7/
If you don't want anything to do with the payroll tax deferral, ask your employer about opting out.
But you do have payroll taxes deferred, the summary of my advice in this thread is to generally change as little as possible in your household budget. 8/8
But you do have payroll taxes deferred, the summary of my advice in this thread is to generally change as little as possible in your household budget. 8/8
