Payroll tax deferral takes effect, how it can impact your wallet

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HARLINGEN, Texas (KVEO) — President Trump’s payroll deferment goes into effect Tuesday, meaning you can see an increase in your paycheck.

“Six percent or so,” said Teo Sepulveda, an economist, and a professor at South Texas College.

The payroll deferral is one of the four executive orders President Trump signed in August after another stimulus failed in Congress.

“Business owners in the meantime will be able to save some money on their payroll. Workers are also going to get a bigger check because they’re not going to be deducted their taxes,” said Sepulveda.

He breaks down how bad the economy fell just a few months ago.

“In April, was the worst month in history,” he said.

The economy has been slowly recovering. President Trump hopes more money in people’s pockets will boost the economy.

“My best guess is the policy is added to speed this up. If the pace continues, it will take us about 10 months or so to go back to where we started and even more months to go back to the long-term trend,” he said.

This is not a tax break. It’s a deferral that congress is looking at starting repayment next year. Unlike stimulus checks, there’s talks of withholding funding for the first few months of 2021. Sepulveda believes once it’s time to repay the economy will plateau.

“Given the fact that it has a time limit and a lot of people are going to be waiting in January and all the way into April to make the payment, maybe it’s not going to boost as much as we wish because people are going to be looking forward and not invest as much and spend as much. Because the repayment and catching up is coming too soon. So, it’ll be better to spread the repayment all through the year,” said Sepulveda.

The IRS has issued guidance for businesses if they want to defer the tax or continue business as usual.

This means businesses can withhold a portion of the social security tax and the money will reflect in your pocket. You’re urged to contact your employer to find out if they plan to defer the collection.

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