SCHRIEVER AIR FORCE BASE, Colo. -- The holidays can be challenging financially under normal circumstances but this year brings unique issues members need to consider and plan for now to mitigate.
Since September, many military and civilian employees have received slightly larger paychecks due to the Presidential Memorandum temporarily deferring Social Security Tax withholdings. That reprieve is scheduled to come to an end as the year does potentially impacting pay checks as holiday bills come due.
Per IRS guidance, collection of the deferred taxes will be taken from member’s wages between January 1 and April 30, 2021 for both military members and civilian employees.
While the details on how the taxes will be recouped is forthcoming, members should plan for not only the 6.2% Social Security tax to be withheld but also an additional 6.2% to pay back the deferred taxes.
“I suggest individuals look back at their August LES since this is the last month that reflects the 6.2% tax being withdrawn and then double that amount to get an estimate of the monthly total,” said Lenea Lance, Schriever Airman and Family Readiness Center Personal Financial Readiness Manager.
To put this into perspective, when comparing today's base pay checks where the Social Security Tax is not being withheld, the potential impact could range from about $215 a month for an E1 with less than two years of service to more than $1,000 a month for those whose base pay approaches the deferment limit of $8666.66.
She advises members to plan for the end of the tax deferral to minimize its impact.
“I cannot stress enough to be proactive. Take action now, assess where you are, what you need and what do you expect to happen or need over the next 6 months. What additional expenses may arise during this time– auto registration, auto maintenance, education expenses, holidays/birthdays, etc.,” she said.
She said there are several options to consider to help reduce one’s financial strain.
“They can schedule an appointment with me at A&FRC to help them look at options based on their needs such as contacting lenders to discuss payment plans, reduce variable expenses such as eating out, quick stops, groceries, clothing purchases, etc., or cancelling unused subscriptions (movies, gaming, music, etc.),” said Lance. “Obtaining auto insurance quotes to find best rates or ensuring military discounts are included on utility bills are other options.”
Through the A&FRC, members can make a thorough assessment of their situations and determine the best courses of action.
“What I have found is that when there is a need, it is just the surface of a much larger need. I try to ensure that all avenues and resources are provided to the individuals to get after the underlying issues,” said Lance.
There are several resources both on base and in the community to benefit members in this process.
“Individuals may need more than one resource – Military Family Life Counselor, Chaplain, finance or the Air Force Aid Society (other military services have their own) are just a few,” she said.
A&FRC will help members navigate the traditional resources available as well as highlight COVID-specific options.
“During this time, resources vary based on need. I would recommend individuals contact their lenders to discuss options available,” she said. “COVID resources are constantly changing. Some programs may be ending such as student loan deferment, yet others could be extended. It is important to look at programs and what is available currently.”
To set up an appointment with the A&FRC call 567-3920 or via email at lenea.lance.2@us.af.mil.
“Ask for help, you do not have to work through these issues on your own,” Lance said in closing.
For more information on the deferral, visit https://www.dfas.mil/taxes/Social-Security-Deferral/. For more information on financial readiness, visit www.finred.usalearning.gov.
To contact Military OneSource visit https://www.militaryonesource.mil or call (1-800-342-9647).
(Senior Master Sgt. Lance Thibault, National Space Defense Center senior enlisted leader, contributed to this article.)