The State of Oklahoma will opt-out of Trump’s payroll tax deferral program

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In an earlier version KFOR reported one agency would opt-out but it will be the State opting out.

OKLAHOMA CITY (KFOR/CNN) – The State of Oklahoma will not be taking part in President Trump’s proposed tax holiday.

Companies and State’s can stop withholding employees’ payroll taxes starting September 1, although workers will have to pay the taxes by the end of April 2021. The new guidance, released together with the IRS, applies only to those whose bi-weekly paychecks are less than $4,000, the equivalent of $104,000 a year.

The guidance comes after President Donald Trump’s August 8 executive action giving workers a tax holiday. It left open the possibility of forgiving the deferred tax later on.

But only Congress has the power to waive taxes, so all the president can do is postpone when they are due.

Although Trump’s action was signed weeks earlier, the guidance was delayed as the White House looked into whether it was possible to waive workers’ taxes entirely rather than deferring them to next year. The answer from the Internal Revenue Service was no, employees are still on the hook for paying their taxes next year.

It is up to the companies or agencies to decide whether they will opt in to the payroll tax deferral. Many were waiting for the guidance from the Treasury Department, but already a collection of business leaders have pushed back against the plan.

“Many of our members consider it unfair to employees to make a decision that would force a big tax bill on them next year,” the US Chamber of Commerce and more than 30 trade associations wrote in an August 18 letter to Congress and the Treasury Department.

“It would also be unworkable to implement a system where employees make this decision,” wrote the groups, adding many of their members will likely decline to defer the tax.

If companies take this approach and withhold taxes for employees starting Wednesday, the taxes will be deferred until January 1. At that time, companies will withhold taxes from paychecks in larger amounts so employees can pay back what they owe.

It’s unclear what happens if employees stop working at their companies before the end of April, either because they have quit or have been furloughed. The IRS guidance says companies can “make arrangements to otherwise collect the total applicable taxes from the employee.”

On Tuesday, the Oklahoma Office of Management and Enterprise Services announced that the state would not be taking part in the payroll tax deferment. This impacts state employees.

“Because this is a very short-term deferral of taxes for which the employee must repay beginning in January, the state will not be deferring the taxes and will withhold and remit payment of Social Security tax under the normal schedule,” the office said in a statement.

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