Press Releases

Bipartisan House Delegation Urges Administration To Allow Military, Federal Workforce Payroll Tax Deferral Opt-Out

Washington, October 2, 2020

A bipartisan group of 43 U.S. Representatives led by Congressman Don Beyer (D-VA) today wrote to Treasury Secretary Steven Mnuchin urging the Administration to allow members of the military and the federal workforce the flexibility to opt in or out of the payroll tax deferral created under President Trump’s August 8 Executive order.

The ultimate implementation of that order allowed private sector employers to determine whether they would participate in the program, but made it compulsory for service branches and the federal workforce. As the letter noted, Secretary Mnuchin was asked in a hearing last week whether he was willing to grant the same choice to those collecting a government paychecks, and replied that doing so would be “reasonable.”

They wrote:

“We urge you to amend IRS guidance to allow military service members and federal employees the ability to choose whether or not their payroll tax obligations will be deferred under IRS Notice 2020-65.

“Feedback from civil servants and service members we represent indicates that the withholding of payroll taxes has been chaotic and confusing for many of those affected. There is widespread concern among the ranks of both groups that deferred payroll taxes will lead to increased tax bills in January and potentially even fees for those who are unable to repay deferred taxes.

“Federal workers and members of the military also report feeling unfairly singled out for mandatory payroll tax deferral. Private companies and business organizations were given the flexibility not to participate in the program, and have largely elected not to defer collection of payroll tax obligations.   The United States Postal Service, likewise, exempted its employees from the policy. Presented with this contrast in a recent hearing, you responded that it would be “a reasonable issue” to allow federal employees and military service members the same flexibility that the Administration granted to the private sector.  We applaud this sentiment, and ask that you put it into practice forthwith.”

The letter’s 43 signers included 39 Democrats and four Republicans. Text of the letter follows below, and a signed copy is accessible here.

Rep. Don Beyer represents more federal workers than any other Member of the House, and serves on the House Committee on Ways and Means, which has jurisdiction over tax policy. He also serves as the top Member of the House on Congress’ Joint Economic Committee.

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October 2, 2020

 

The Honorable Steve Mnuchin
Secretary
Department of the Treasury
1500 Pennsylvania Ave. NW
Washington, DC 20220

Dear Secretary Mnuchin,

We urge you to amend IRS guidance to allow military service members and federal employees the ability to choose whether or not their payroll tax obligations will be deferred under IRS Notice 2020-65.[1]

Feedback from civil servants and service members we represent indicates that the withholding of payroll taxes has been chaotic and confusing for many of those affected. There is widespread concern among the ranks of both groups that deferred payroll taxes will lead to increased tax bills in January and potentially even fees for those who are unable to repay deferred taxes. [2] There is also significant trepidation that changes to payroll tax collection could adversely impact Social Security. These concerns have been worsened, they tell us, by poor communication within some agencies and service branches about payroll tax deferral, particularly regarding the methods that will be used to collect deferred tax obligations beginning in January of next year.[3]

Federal workers and members of the military also report feeling unfairly singled out for mandatory payroll tax deferral.[4] Private companies and business organizations were given the flexibility not to participate in the program, and have largely elected not to defer collection of payroll tax obligations.[5][6] The United States Postal Service, likewise, exempted its employees from the policy. Presented with this contrast in a recent hearing, you responded that it would be “a reasonable issue” to allow federal employees and military service members the same flexibility that the Administration granted to the private sector.[7] We applaud this sentiment, and ask that you put it into practice forthwith.

Payroll tax deferrals are already being reflected in government-issued paychecks for the final pay period of September. We therefore urge you to indicate your definite intention to grant all affected members of the United States military and employees of the federal government the choice to opt out of the policy as soon as possible. We further urge you to implement such changes consistently, without threat of adverse consequences, and with clear communication. The longer it takes to initiate changes, the more complex the conversion will be for payroll providers, and the more confusing the paycheck fluctuations will be for those affected.

We thank you for attention to this matter, and request a response with updates on what actions you intend to take not later than October 10, 2020.

Sincerely,



[1] IRS Notice 2020-65, accessible at https://www.irs.gov/pub/irs-drop/n-20-65.pdf

[2] Nicole Ogrysko, “What they’re saying about the payroll tax deferral,” Federal News Network, September 28, 2020 https://federalnewsnetwork.com/mike-causey-federal-report/2020/09/what-theyre-saying-about-the-payroll-tax-deferral/

[3] Jim Tankersley, “Trump’s Payroll Tax ‘Cut’ Fizzles,” New York Times, September 11, 2020 https://www.nytimes.com/2020/09/11/business/trump-payroll-tax-cut.html

[4] Tony Romm and Eric Yoder, “Federal workers will have taxes deferred under Trump’s order, sparking outcry they’re being treated as a ‘guinea pig,’” Washington Post, September 2, 2020 https://www.washingtonpost.com/us-policy/2020/08/31/payroll-tax-trump-federal-employee/

[5] Richard Rubin, “Some Large Employers Reject Trump’s Payroll-Tax Deferral Plan,” Wall Street Journal, September 11, 2020 https://www.wsj.com/articles/some-large-employers-reject-trumps-payroll-tax-deferral-plan-11599840079

[6] Brian Faler, “Businesses warn they won't participate in Trump's payroll tax plan,” Politico, August 18. 2020 https://www.politico.com/news/2020/08/18/businesses-payroll-tax-397777

[7] Treasury Secretary Steven Mnuchin exchange with Senator Chris Van Hollen, “Hearing: The Quarterly CARES Act Report To Congress,” U.S. Senate Committee on Banking, Housing, and Urban Affairs, September 24, 2020