.
.
So the above article tweaked a question in my brain. This is a serious question.
So if my payroll taxes get deferred and not taken out of my check, I get more money in my paycheck.
Now with more money in my paycheck I have a higher income during that pay cycle of 7.65% (SS, Medicare). That increased income will be taxed as income for tax year 2020. Next year there will be additional withholding to pay-back the deferral between January 2021 and April 2021 so my paychecks will be smaller.
So questions:
#1 Won’t my paid income taxes now be higher for the 2020 tax year due to increased income. Meaning I either see more income taxes taken out this quarter or I own more money to the IRS next April because of increase tax liability.
#2 No on the other hand I’ll see increased deductions and smaller paychecks for the 1st quarter of 2021, which means a smaller tax bill in 2022 when I file for the 2021 tax year, right?
.
.
.
.WW, PSHS
Well, the actual reportable income would remain the same. If you look at your W2, that is what is listed in box 1. What would change from your perspective is the net income (amount from the reportable / gross income that is reported on line 1 that you are able to keep in your pocket.) So, the income amounts for the respective years wouldn’t change.
What would change is the amount of tax liability due - notably on that 7.65%. This is normally subtracted from the gross amount that would be shown on your actual paycheck or direct deposit.
Now, I’ll be honest, it’s been a while since I’ve done taxes as I’m more into internal controls now, so I’m not sure exactly how the bookkeeping on that is going to work at this point. But, essentially, you will have more money this year, and will have an offsetting decrease at some point in the future (likely next year if I’m understanding it correctly).
The overall gross income would remain the same.
Now, if you’re self employed, that could open up another can of worms as that is calculated differently via a Schedule C attached to the tax forms.
Let me know if this helps out any. As I said, it’s been a while since I’ve done taxes, so I may be a bit rusty on explaining this. Your local H&R Block office could also probably answer something like this over the phone. They would have access to the most up to date information.
1 Like
