In a memo to employees, the Postal Service, which is an independent agency of the executive branch, said that it has elected not to implement the deferral after “thoroughly” reviewing the impact it would have on employees and the agency.
A deferral would mean that employees are required to pay back the obligations next year, according to the Postal Service.
The deferral will be automatic for some U.S. military salaries. There will be no option for either civilian or military employees to opt-out if their wages fall within the specified thresholds.
The Office of Management and Budget confirmed to FOX Business that it plans to implement the deferral. 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 is 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 $751 for someone earning $35,000 to nearly $1,610 for someone earning $75,000.
Legislation has been introduced in the House Ways and Means Committee to forgive those deferred obligations, rendering the measure a payroll tax holiday.
In the event that deferrals are not forgiven, interest and penalties would begin accruing on May 1.
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.