State, NU won’t take part in temporary payroll tax cut

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Employees of both the state and the University of Nebraska won’t participate in President Donald Trump’s offer to defer payroll taxes for the remainder of this year.

In August, Trump signed an executive order that would allow employers to choose to defer paying Social Security taxes for the remainder of this year as a way to provide temporary economic relief from the pandemic.

But his plan would require employees to pay back the deferred payroll taxes in the first four months of 2021 — January through April — unless Congress acts to forgive them.

For state employees, who pay 6.2% of their taxable wages into Social Security and are matched by a 6.2% contribution from the state, recouping the taxes would mean substantially less pay for them early next year, the Department of Administrative Services said in a memorandum obtained by the Journal Star.

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“Primarily due to the detriment this would cause to teammates, in the form of a significant net pay reduction over a four-month period, the state has elected not to participate in the deferral,” wrote Philip Olsen, the state accounting administrator.

Employees will not have the option of voluntarily enrolling into the program either, Olsen added.

NU said earlier this week it was following the state’s lead in not participating in the program, in order to avoid employees having to pay “double deductions for the Social Security tax in the first four months of 2021.”

A university employee earning the median salary of $52,000 would have received $273 more in their paycheck in the final four months of 2020 before having an additional $273 deducted from their paycheck early next year.

The deferments were available to people earning $4,000 or less per biweekly pay period beginning Sept. 1. Trump proposed the deferral after Congress was unable to agree on a new coronavirus stimulus package.

Many small and large businesses owners have said allowing the deferment would create more work for them and confusion for their employees.

Other states, including Arizona, Indiana and Missouri — each controlled by GOP governors — also said state employees would not participate in the tax deferral program.

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Reach the writer at 402-473-7120 or cdunker@journalstar.com.

On Twitter @ChrisDunkerLJS

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