Are your Social Security tax withholdings being deferred?
Social Security Tax Withholdings Strategy
Are you in the military or a civil service employee? If you are, you might not realize that in order to provide relief during the COVID-19 pandemic, Social Security tax withholdings were deferred temporarily for some workers. This deferment is effective through the end of the 2020 calendar year.
What does “temporary deferment” mean?
A deferment means these taxes will need to be repaid. According to federal employee unions, those affected by the suspension of Social Security taxes “should plan on repaying the deferred taxes beginning January 1.” The full amount must be repaid by April 30 unless Congress waives that obligation, which is unlikely.
Effective for the September mid-month pay, withholding of the 6.2% Social Security tax was deferred if the monthly rate of basic pay is less than $8,666.66. If the monthly rate of basic pay is at or above this threshold, your social security tax withholding was not be affected by the temporary deferral. Military members can use their August or prior LES as a good reference for their typical Social Security tax amount which can be found in the deduction section of the LES. The Social Security tax is generally calculated as 6.2% of basic pay for military members.
Effective pay period ending September 12, 2020, DFAS temporarily deferred the 6.2% OASDI tax withholding if wages, subject to OASDI are less than $4,000 in any given pay period. Employees can use the “Taxable Wages” on the LES as a good reference for whether they had OASDI tax deferred.
What can you do now?
Put aside money to start saving now. Global provides the perfect savings account, just for this type of situation. It is a high-yield, federally insured savings account. It’s called Smart Savings, and that is because it truly is smart! What makes it so smart? You earn 6.5% APY* up to $650. Over $650 earns .10% APY*. Click here to learn more about Global’s Smart Savings.
What are other options?
If you do not have any money set aside, another option is a low rate personal signature loan. With a personal loan, you have the ability to borrow up to your approved limit and repay at a fixed rate for a set amount of payments. This type of loan is quick and easy, requiring no collateral and no loan fee. Click here to learn more about Global’s Signature Loan.
The OASDI deduction is found on your LES under the deductions tab/section. Military members and civilian employees are not eligible to opt-out of the deferral if their Social Security wages fall within the stated limits. The deferral will happen automatically. Per IRS guidance, collection of the deferred taxes will be taken from wages between January 1 and April 30, 2021 for both military members and civilian employees. Additional information on the collection process will be provided in the future.
Make smart choices and stay up-to-date on the latest. We recommend that you talk to your financial professional and tax advisor to find out how this may affect you.
Visit the IRS page.
For more information on financial readiness
Visit your installation Military and Family Support Center to speak with a Personal Financial Manager or Counselor, or contact Military OneSource at https://www.militaryonesource.mil (1-800-342-9647).
Call Global Credit Union and speak with a Member Service Representative. Not a Member? No problem. Contact us here.
*APY=Average Percentage Yield. Rate is subject to change and may change after the account is opened. Membership is required to open account and fees may reduce earnings. APY is accurate as of the last dividend declaration date.