Democrats seek clarity on payroll tax deferral for federal workers

A group of Democrats on the House Ways and Means Committee is asking the Trump administration for clarity about the IRS guidance on the president’s order to defer payroll taxes and how it would be implemented for federal workers.

“Nearly a month after the President’s memorandum on deferring payroll tax obligations, the administration’s conflicting and changing statements have left employers and employees confused,” the lawmakers wrote in a letter to Treasury Secretary Steven Mnuchin, Agriculture Secretary Sonny Perdue and Office of Personnel Management acting Director Michael Rigas.

On Aug. 8, Trump issued a memo directing the Treasury Department to allow employers to defer payment of Social Security payroll taxes for employees making less than $4,000 every two weeks.

The IRS issued guidance last week implementing the order, under which employers can cease to withhold Social Security payroll taxes from their workers’ paychecks from Sept. 1 through Dec. 31, and then collect the deferred taxes by increasing the amount of taxes withheld from paychecks in the first four months of next year.

The Democratic lawmakers said there are some unanswered questions about the guidance. They also said there has been a “lack of cross-agency coordination” on the deferral of payroll taxes for federal employees. While many private-sector employees are not expected to enroll in the deferral, the federal government is planning to have its employees participate.

“We are especially alarmed that after many businesses and groups, including the U.S. Chamber of Commerce, have expressed concern about the ramifications of deferral for employers and employees, federal public servants are being used as guinea pigs,” the lawmakers wrote.

The lawmakers asked what steps are being taken to notify federal employees that they will see less in take-home pay early next year, whether there will be any procedures for federal workers to opt-out of having their payroll taxes deferred and how the federal government plans to collect deferred payroll taxes for employees who leave their jobs before or during 2021.

The National Finance Center, a payroll provider for federal employees housed in the Agriculture Department, has issued notices about deferring payroll taxes. Lawmakers asked if other payroll providers for federal workers will be implementing similar procedures and how many federal workers would be impacted.

Seventeen Democrats on the committee, which has jurisdiction over taxes, signed the letter including Rep. Don Beyer, whose Northern Virginia district includes many federal employees.

Tony Reardon, president of the National Treasury Employees Union, which represents about 150,000 federal employees, sent a letter to the Office of Management and Budget on Wednesday asking similar questions about the payroll tax deferral for federal workers.