By Ben Banchs

Last September, President Trump issued a Memorandum titled "Deferring of Payroll Tax Obligations in Light of the Ongoing COVID- 19 Disaster," which directed the Secretary of the Treasury to defer certain payroll tax obligations for the remainder of 2020. Specifically, if an employees' wages, subject to Social Security Tax (aka Old Age, Survivors, and Disability Insurance), were $4,000 or less in any given pay period, then they would have their Social Security Tax Deductions deferred until 2021.

While private sector employees had the ability to opt out, federal employees and members of the military did not have the same option, and per Trump's directive, DFAS temporarily began deferring the 6.2% OASDI (Old Age, Survivors, and Disability Insurance) tax withholding from employees that met the earnings threshold starting with the pay period ending September 12, 2020,

The deferral temporarily increased employee take-home pay. However, much to the dismay of most, deferral doesn't mean gift. Rather, it was more like a forced loan, and Uncle Sam wants his money back. So, effective the pay period ending January 16, and through the pay period ending April 30, 2021, the amount of Social Security taxes deferred on your behalf in 2020 will be deducted from your regular pay in eight separate installments. 

If you separate or retire before the first pay period of 2021, well you're still not out of the woods. Uncle Sam likes his money and he's coming for you one way or another. If the owed taxes cannot be deducted from your regular pay because you are no longer an employee. you are still responsible for repayment of the deferred taxes. In that case, DFAS will pay the deferred Social Security taxes to the IRS on your behalf, which means you will now owe DFAS for this repayment. Once they pay your debt to the IRS they will send you a collection letter, which will be posted to your myPay account in January 2021. You will also receive a copy of the letter at your home of record via US Mail. The debt letter will provide instructions for repayment; payments can be made online via Pay.gov. 

Early estimate of current DoD employees impacted by the tax deferral is 598,245 (includes bargaining unit employees and non-bargaining employees).  This number is likely to increase at the end of the upcoming pay period.

For more information make sure to check out the DFAS FAQ page:

https://www.dfas.mil/taxes/Social-Security-Deferral/Civilian-Employee-FAQs/