Letter to Steven Mnuchin, Secretary of the Treasury - Bipartisan House Delegation Urges Administration To Allow Military, Federal Workforce Payroll Tax Deferral Opt-Out

Letter

Dear Secretary Mnuchin,

We urge you to amend IRS guidance to allow military service members and federal employees the ability to choose whether or not their payroll tax obligations will be deferred under IRS Notice 2020-65.[1]

Feedback from civil servants and service members we represent indicates that the withholding of payroll taxes has been chaotic and confusing for many of those affected. There is widespread concern among the ranks of both groups that deferred payroll taxes will lead to increased tax bills in January and potentially even fees for those who are unable to repay deferred taxes. [2] There is also significant trepidation that changes to payroll tax collection could adversely impact Social Security. These concerns have been worsened, they tell us, by poor communication within some agencies and service branches about payroll tax deferral, particularly regarding the methods that will be used to collect deferred tax obligations beginning in January of next year.[3]

Federal workers and members of the military also report feeling unfairly singled out for mandatory payroll tax deferral.[4] Private companies and business organizations were given the flexibility not to participate in the program, and have largely elected not to defer collection of payroll tax obligations.[5][6] The United States Postal Service, likewise, exempted its employees from the policy. Presented with this contrast in a recent hearing, you responded that it would be "a reasonable issue" to allow federal employees and military service members the same flexibility that the Administration granted to the private sector.[7] We applaud this sentiment, and ask that you put it into practice forthwith.

Payroll tax deferrals are already being reflected in government-issued paychecks for the final pay period of September. We therefore urge you to indicate your definite intention to grant all affected members of the United States military and employees of the federal government the choice to opt out of the policy as soon as possible. We further urge you to implement such changes consistently, without threat of adverse consequences, and with clear communication. The longer it takes to initiate changes, the more complex the conversion will be for payroll providers, and the more confusing the paycheck fluctuations will be for those affected.

We thank you for attention to this matter, and request a response with updates on what actions you intend to take not later than October 10, 2020.

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