SAN DIEGO — Beginning Sept. 1, employees can opt to take a so-called "payroll tax holiday" under an executive order signed by President Donald Trump last month.
While this could provide a temporary boost to a worker's paycheck during the financially tight times of the coronavirus pandemic, there is a major catch.
This tax deferral is specifically the 6.2% which workers pay into social security and only applies to those making under $104,000 annually. For example, if you make $50,0000 a year, that would come to $3,100 annually, or an approximately $258 more in your paycheck every month.
"This is a tremendous amount of money that is being supplied and given to families... tremendous," Trump said after signing his executive order last month.
While the president has characterized this payroll tax deferral as money given to families, that is not the case at this point in time.
"This is essentially an interest-free loan from the government for a four-month period of time," said business expert LJ Suzuki, founder of the Denver-based company CFOshare.
He cautioned that if an employee opts for this tax deferral, sometimes called a "payroll tax holiday," that holiday will come to an end on Dec.31.
"And then starting in January of 2021, you have to pay it back by paying double taxes for four months until April," Suzuki explained.
The intent of the order is to allow workers to select this tax deferral if they choose.
"Now, unfortunately, the way that it is written, it is a little difficult for companies to put into place," Suzuki told News 8. "And so, as a result, a lot of people think companies simply won't offer this program to employees. As of right now, there are no penalties or anything like that associated with that."
Suzuki added that, based on the average American salary, an employee would receive about $1,200 in deferred taxes over the four-month period, "which is the same amount as the stimulus checks were."
In the case of the stimulus checks, recipients did not have to repay it.
President Trump has said he envisions this "tax holiday" the same way.
"When I win the election, I'm going to completely and totally forgive all deferred payroll taxes," he promised last month.
However, that depends on Congress and at this point, is just speculation.
"As of right now, it is just a deferral that you have to pay back," Suzuki said.
Suzuki said that this four-month "tax holiday" could help out during these financially trying times, for example for a family struggling to make rent or a car payment.
This temporary pay boost for workers - from an employers' perspective - could also boost their employees' productivity.
"For those people, this extra 6.2% tax deferral can make a difference, and if it makes a difference for them, it makes a difference for your company" Suzuki added.
President Trump has also said that he plans to protect social security and that even if these deferred taxes are forgiven down the road, that money would come from the General Fund.
Forbes magazine has created a calculator to estimate what your how large your temporary tax deferral may be. Click here to check it out.