JBLM employees and troops are about to get a tax break — but must pay it back in 2021
Tens of thousands of Washington military and civilian Defense Department employees will get a big tax cut from the federal government this month — but will then have to pay back the money quickly next year.
The Pentagon announced Thursday that it will stop deducting the 6.2% payroll, or Social Security tax, from qualified employees’ paychecks from this month until the end of the year.
That would mean a big break for most of the state’s 112,181 defense employees this fall — for awhile.
Starting Jan. 1, those same employees will have to pay the money back.
The change will affect service members whose basic rate of pay is $8,666.66 or less in a month. Those earning more who are required to pay the tax will continue to do so.
According to the Military Times, the tax deferral will affect enlisted personnel, almost all warrant officers and many officers, to include everyone through the grade of O-4. Officers in the grade of O-5 with less than 16 years of service, and those in the grade of O-6 with less than 14 years of service are affected.
This means a service member whose monthly basic pay is $3,306.30, could anticipate $204.99 in the monthly net take home pay for the next four months, the Pentagon said.
But starting in January, and continuing until April, that $204.99 will be taken from the service member’s pay — as well as the 6.2% Social Security tax, which returns. Some of that could be eased if a proposed 3% military pay raise takes effect.
Civilian employees whose pay is subject to the tax, and are less than $4,000 in a biweekly pay period, will also have the payroll tax deferred. And they too will have to repay it in the first four months of 2021.
The plan is expected to impact employees at Joint Base Lewis-McChord, Naval Air Station at Whidbey Island, the Puget Sound Naval Shipyard and Intermediate Maintenance Facility in Bremerton, the Naval Undersea Warfare Center in Keyport, Naval Bases in Everett and Kitsap, as well as Madigan Army Medical Center, the 13th Coast Guard District and the National Guard. About 54,000 of the state’s military employees work at JBLM.
The maximum break is $248 every two weeks. Employees stop paying the tax, which helps fund Social Security, when their income reaches $137,700 this year. People earning more continue to pay a Medicare tax.
The payroll tax plan has been controversial.
Tuesday, 23 U. S. senators, including Patty Murray, D-Washington, sent a letter to Treasury Secretary Steven Mnuchin and Budget Director Russell Vought urging them to allow Pentagon employees to choose whether or not they wanted the taxes deferred.
“Federal workers and service members should not be used as pawns for a payroll tax scheme that many private sector employers are unlikely to join and where key questions remain unanswered,” the senators wrote.
The U.S. Chamber of Commerce and more than 30 trade associations wrote Congress that the plan “creates a substantial tax liability for employees at the end of the deferral period.
President Donald Trump created the break in an executive action August 8, explaining it would help the economy as consumers got more money to spend.
He said he would push congressional lawmakers to continue the break next year, or at least void the payback. But there has been little support in Congress.
The Pentagon’s announcement noted that because of differences in pay systems, the tax deferral process will be different for most people in the National Guard and Army, Air Force, or Navy Reserves.
If they qualify for the tax break, their initial net pay will have the tax withheld.
Then two to three business days later, the Defense Department said, “a separate pay transaction will be processed to refund the Social Security taxes that were withheld from the initial pay.”
In addition, they will get an additional Leave and Earnings Statement being provided members in MyPay with an entry labeled “FICA Refund” reflecting the refunded Social Security tax amount.
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