By Tammy Fink
Yes, you read that correctly. For pay periods beginning after Sept. 12, those in federal service – service members and civilians alike – will be seeing a 6.2 percent increase (of gross wages) to their paychecks.
This is due to a new payroll-tax deferral in effect through the end of the calendar year. For civilian employees with wages less than $4,000 subject to Old Age, Survivor and Disability Insurance Tax – or OASDI – in any given pay period and for service members earning less than $8,666.66 monthly gross pay (before deductions), social security tax will be automatically deferred. There is not an opt-out election; it is mandatory. Below are a few examples of how much more you will be receiving.
GS-9 (step 1) employees should see approximately $126.16 extra each pay period. GS-11 (step 1) employees should see approximately $152.64. An E-4 (with two years’ time in service) should see approximately $70.15 on the 1st and 15th day of the month, and an O-3 (with 10 years’ time in service) should see approximately $181.26.
If you want to be certain, look at your Leave and Earnings Statement. Civilian employees can locate this tax under OASDI deductions and military can locate it under FICA-Social Security deductions.
While having extra money headed into the holiday season may sound appealing, this money must be paid back beginning Jan. 1 from your paychecks. You will begin seeing a reduction of pay in January for each pay period in the amount that was deferred.
If you have concerns about how you are going to get through the increase in taxes withheld from January to April, I recommend putting the extra money you have received each paycheck into a separate bank account. Save it. When the repayment of the deferral begins, simply take the amount they have deferred each paycheck and put that back into your spending account to pay your bills.
If you fail to repay the deferral, you will be subject to penalties and interest yet to be determined. If you are separating or retiring between now and April 30, you are still required to pay back what was deferred.
Visit the Defense Finance Accounting Service website for more information at https://www.dfas.mil/taxes/social-security-deferral/. If you have concerns or if you are confused about how this deferment is going to impact your financial stability, call the Fort Leonard Wood Financial Readiness Office at 573.596.2078.
(Editor’s note: Fink is an accredited financial counselor and personal financial readiness specialist with Army Community Service.)