topic Will the social security tax deferral that started this September 2020 count as income? If an employer opts-in will it be taxed? in Retirement tax questions

Will the social security tax deferral that started this September 2020 count as income? If an employer opts-in will it be taxed?

8evie8 — Fri, 25 Sep 2020 16:32:08 GMT

If forgiven, will it count as income?

Re: Will the social security tax deferral that started this September 2020 count as income? If an employer opts-in will it be taxed?

rjs — Fri, 25 Sep 2020 18:46:19 GMT

Deferring the Social Security tax does not increase your taxable income. Your full gross pay is taxable, whether or not Social Security tax is taken out.

We cannot be certain what the rules would be if the deferred tax is forgiven, since no legislation to forgive it has been passed, or even proposed. But it seems extremely unlikely that the forgiven tax would be treated as taxable income, since you have already paid tax on it.

Re: Will the social security tax deferral that started this September 2020 count as income? If an employer opts-in will it be taxed?

Opus 17 — Fri, 25 Sep 2020 22:49:48 GMT

There's no legal basis to treat a tax that is not collected as income. The IRS would never consider it income, and only an incredibly incompetent Congress could turn it into income, and if that happened I'm sure the courts would rule against it quickly.

The risk is that you will still have to pay your full social security tax. If you spend the deferred amount, you might be on the hook for repayment later, unless Congress (before or after the election) passes a law to forgive the uncollected tax.

But there is no realistic concern in my humble opinion that an uncollected tax would be treated as taxable income, even if the tax was canceled by a new law instead of just being deferred.