The deferral, which is expected to take effect in mid-September, will be automatic for civilian employees with wages less than $4,000 per pay period and service members with a monthly rate of basic pay of less than $8,666.66, according to the Defense Finance and Accounting Service.
There will be no option for either civilian or military employees to opt-out if their wages fall within the specified thresholds.
In a post on her Facebook page, Chief Master Sgt.bof the Air Force JoAnne Bass said that the extra money members receive during the coming months will be expected to be paid back next year.
A spokesperson for the Department of Defense did not immediately return FOX Business’ request for comment on the policy, which is set to start begin with the pay period ending Sept. 12.
The Office of Management and Budget confirmed to FOX Business that it plans to implement the deferral as soon as possible. It has been reported that there will be no choice for about 1.3 million federal workers to opt-out of the policy.
According to the IRS guidance, employers are able to defer payroll tax withholdings for employees with incomes below $4,000 during a bi-weekly pay period, calculated on a pre-tax basis, or the equivalent.
The deferral period will be Sept. 1 through Dec. 30, until a pay period begins on January 1.
The U.S. Chamber of Commerce cautioned that workers could owe amounts ranging from around $751 for someone earning $35,000 to nearly $1,610 for someone earning $75,000.
Trump, however, has said he will forgive those deferrals– a move that would require congressional action – rendering the measure a true payroll tax holiday.
In the event that deferrals are not forgiven, interest and penalties would begin accruing on May 1.
Timothy McGrath, managing partner at Riverpoint Wealth Management, told FOX Business that if deferrals are not forgiven it could cause some challenges for workers next tax season.
The payroll tax is paid separately from federal income taxes. It funds Social Security and Medicare. Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners.
The executive order applies only to the 6.2 percent Social Security obligation.