Local wealth advisor explains what Trump’s executive order means for your paycheck

Updated: Aug. 14, 2020 at 4:22 PM CDT
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BATON ROUGE, La. (WAFB) - Congress is working to bridge the gap between two different proposed plans: the $3 trillion HEROES Act and the $1 trillion HEALS Act.

In the meantime, President Trump announced that he would cut, or technically “pause,” the payroll tax for those of you who earn less than $4,000 per bi-weekly pay period.

Local wealth advisor Ernie Burns explains this is a temporary fix.

“The individual will take home more pay, therefore it looks better at the beginning,” said Ernie Burns President and CEO of Burns Estate Planning and Wealth Advisors. “The problem is you still have to pay those taxes at tax time of next year. It could be a benefit short-term, but in the long term, it’s really not that much of a benefit.”

Trump’s executive order would put about three to eight percent of your paycheck back into your pocket.

If you’re wondering how much that is, pull out a recent paystub.

Look for the portion that says FICA or Social Security tax. Those are the parts of your paycheck directly affected with this order.

Workers pay 6.2% of their wages to help finance Social Security. Then, employers match that percentage on the employee’s behalf.

So, those are the amounts you may see back in your pocket in September. However, the responsibility of the executive order falls on the employer. They have a choice to take the payroll tax cut or not.

“It’s a Band-Aid, I guess you could say. If you chose to take that,” said Burns. “For example, my staff was alerted about this the other morning and they’re like ‘we really don’t want to do that.’ Because they don’t want to pay that next year.”

Questions still linger about whether there will be another official relief bill. It’s unclear when congress will pass their final decision on a second stimulus check. But Burns thinks things will move much quicker this time, once the final decision is made.

He explained that it took about two months for the first stimulus check to move from the Congress floor to your pocket. Burns says it shouldn’t take as long for you to see that money next time since the government has already done this process one time before.

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