Military, federal workers now have all year to repay deferred taxes

Previously, taxes had to be repaid by April 30

Military earners now have all of 2021 to pay back payroll taxes that were deferred last year, easing what had been a feared financial blow.

The 2021 Consolidated Appropriations Act, passed by Congress just before Christmas and signed by President Trump late on Dec. 27, sets the period for collection of those deferred taxes as Jan. 1, 2021 through Dec. 31, 2021, according to the Defense Finance and Accounting Service (DFAS).

Previously, the repayment period had been more compressed, with payback due by April 30, 2021.

Mike Meese, a retired Army brigadier general and president of the American Armed Forces Mutual Aid Association, welcomed the news, but noted:

“It still means that, in spite of a nominal 3% pay raise, service members will still receive less in their paychecks every month in 2021 than they did during the last four months of 2020.”

“Some military families will be quite surprised when their take-home pay falls by several hundred dollars just as bills from the holidays are due,” he added in an email Monday.

“Beginning January 2021, the normal 6.2% Social Security tax withholdings will again be deducted from pay for military members and civilians, and an additional deduction for the deferred 2020 Social Security tax collection taken from pay,” DFAS said in a recent notice.

Some background: President Trump in August directed that Social Security taxes be temporarily deferred for service members and federal employees earning $104,000 or less.

The idea was to provide relief to workers amid the pandemic-induced recession. But few private businesses participated, fearing the smaller pay checks expected in 2021, when the deferred amounts were to be paid back.

The federal government’s legislative and judicial branches also opted out of the deferral, noted Tony Reardon, president of the National Treasury Employees Union, which represents federal employees, including about 3,300 Ohio IRS and Customs and Border workers.

Which left those serving in the military and federal administrative employees — those earning less than $104,000 a year — who were not able to opt out, however.

Beginning this month, the pay of military members should reflect the monthly collection amount. They should see a note in the “remarks” section of their Leave and Earnings statement that shows the remaining balance of deferred Social Security taxes, DFAS said.

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