Military members can’t opt out of Trump’s payroll tax deferral

Military members will be subject to President Trump’s payroll tax deferral and will not be able to opt out of it, the payroll services provider for the Department of Defense said over the weekend.

“Military members are not eligible to opt-out of the deferral if their Social Security wages fall within the stated limits,” the Defense Finance and Accounting Service (DFAS) said on its website. “The deferral will happen automatically.” 

Trump signed a memo last month directing the Treasury Department to allow employers to defer payment of employee-side Social Security payroll taxes, in an effort to provide relief to workers during the coronavirus pandemic. Under IRS guidance implementing the order, employers can cease withholding the 6.2 percent Social Security tax from Sept. 1 through Dec. 31 for workers who make less than $4,000 biweekly, and then recoup the money by increasing the amount withheld from workers’ paychecks in the first few months of next year.

While the federal government is participating in the deferral, many private-sector employers are not expected to do so. Business groups have been critical of the deferral because they don’t want to put their employees in a position where they’ll get smaller than usual paychecks next year. 

The DFAS said the Social Security tax deferral will be effective for military members’ mid-September pay for service members whose monthly rate of basic pay is less than $8,666.66. The payroll provider said that collection of the deferred taxes would be taken from wages between Jan. 1 and April 30 and that it would provide more information about the collection process in the future.

The payroll tax deferral will also be mandatory for civilian Defense Department employees whose wages are below $4,000 in a given biweekly pay period, the DFAS said.

Democratic lawmakers and unions representing federal employees have criticized the fact that the deferral is mandatory for federal employees.

“The President’s order will give the illusion of pay increases until after the election, and then require service members to pay the money back with double tax withholding,” Rep. Don Beyer (D-Va.), whose Northern Virginia district includes many federal workers, said in a statement Tuesday. “This is a disgraceful way to treat those who serve and sacrifice to keep us safe, and Trump’s trickery is obviously designed to help his campaign.”

Beyer is co-sponsoring legislation that Rep. John Larson (D-Conn.) introduced on Friday to block the payroll tax deferral.