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2020 Tax Deferral Update

In August, the President issued a memorandum suspending collection of payroll taxes from federal employees from Sept. 1 through Dec. 31, 2020. This was optional for private sector employers and largely rejected. NATCA did not agree to and was not permitted to negotiate this change in payroll tax withholding.

The suspension of collection did not affect employees’ obligations to pay the taxes, consequently, on Jan. 1, 2021, those taxes became due. Although the IRS issued guidance that the taxes were to be collected during the first four months of 2021, Congress extended that deadline through Dec. 31, 2021. 

Employees who had their taxes deferred, generally those who earn less than $4,000 per pay period, had the first repayment withheld in the amount of approximately $50 with the first pay date of the new year (Jan. 12, 2021). Repayment of the remaining deferred tax balance will be in equal amounts during the remaining 23 pay periods of 2021. Similar to the initial implementation, NATCA did not agree to and is not permitted to negotiate this change in payroll tax withholding.