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What Trump's executive order on payroll taxes reall means
(Sorry if this is a dupe - I did a quick search and didn't find it).
This is the first explanation I've seen that actually captures what Trump did with his executive order - and the consequences for ordinary people and businesses.
Under Trump’s memorandum, payroll taxes that normally would be automatically withheld from employees’ paychecks every pay period don’t have to be withheld through the end of 2020. Still, the taxes must eventually be remitted to the Internal Revenue Service. That means a balloon payment will come due in 2021. So, who will be left holding the bag?
There are three possibilities.
Scenario #1: Congress opts for a tax jubilee, forgiving these delayed payroll taxes altogether and converting Trump’s tax deferral into an outright tax cut. Trump is clearly hoping for this.
. . .
Scenario #2: Congress does nothing, and employees still have to pay all these deferred taxes when filing their income tax returns next year. That is, a huge, unexpected bill will come due around April 15.
. . .
This brings us to Scenario #3: Employers — including cash-strapped small businesses — are left holding the bag. And at this point, the tax bill could actually get bigger. Here’s why: Come 2021, if and when employers pay the IRS for the payroll tax debts their employees never paid, under U.S. tax law such payments would be treated as income to each affected employee.
There are three possibilities.
Scenario #1: Congress opts for a tax jubilee, forgiving these delayed payroll taxes altogether and converting Trump’s tax deferral into an outright tax cut. Trump is clearly hoping for this.
. . .
Scenario #2: Congress does nothing, and employees still have to pay all these deferred taxes when filing their income tax returns next year. That is, a huge, unexpected bill will come due around April 15.
. . .
This brings us to Scenario #3: Employers — including cash-strapped small businesses — are left holding the bag. And at this point, the tax bill could actually get bigger. Here’s why: Come 2021, if and when employers pay the IRS for the payroll tax debts their employees never paid, under U.S. tax law such payments would be treated as income to each affected employee.
https://www.washingtonpost.com/opinions/trumps-inadvertent-tax-hike/2020/08/10/12457502-db00-11ea-809e-b8be57ba616e_story.html?fbclid=IwAR2xP-Js00IMtVgL_HMoeCDiVprBSD96TMFuanSrfoT8hkauvWgLvdf6z9A
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