Social Security is often at the center of some very heated political debates. People have strong feelings about Social Security and it seems as if some threat or another to the Social Security system is being talked about on various news outlets. Once again Social Security is in the headlines. President Trump made an announcement recently regarding the deferment of payroll taxes. Here, we will discuss what this could mean for Social Security, Social Security disability in particular.
What Deferring the Collection of Payroll Taxes Could Mean for Social Security
Payroll taxes play an integral role in Social Security. In fact, the independent chief actuary of the Social Security Administration estimates that, if all contributions to Social Security from payroll taxes came to a halt on January 1, 2021, close to 10 million people receiving Social Security Disability Insurance today would have their monthly payments come to a sudden stop in about the middle of the year. This means that those nearly 10 million people would stop receiving Social Security Disability Insurance payments, which averages close to $1,125, each month. On top of this, the 55 million who are receiving Social Security Old-Age as well as those receiving Survivors Insurance benefits, which pay an average of $1,440 every month, would see these payments stop within two years later.
Section 7508 of the Internal Revenue Code provides for deferrals on the collection of payroll taxes for up to one year when a disaster has been declared. In this case, the disaster is the COVID-19 pandemic and the President is asserting that the suspension of payroll taxes will help stimulate the struggling economy of the U.S. The President has currently ordered the Treasury Department to stop collecting payroll contributions dedicated to Social Security for the next four months. Should he be re-elected and continue to defer payroll taxes, the deferment could span a long enough period that disability insurance payments would stop altogether.
The U.S. Department of the Treasury released more specific guidance relating to the payroll deferral action. As of the first of September, companies are able to stop the withholding of payroll taxes. Under the plan as it currently stands, however, these taxes would still need to be paid by the end of April 2021. That, however, could change. Just during the suspension through the end of 2020, the U.S. will be missing out on 26% of federal revenue according to estimates made by the Congressional Budget Office.
In an ever-evolving political climate, those who rely on Social Security and Social Security disability, in particular, may be afraid of what is to come. Will Social Security see an end in the new future? Will it be replaced by something else? These are all good questions. Disability Advocates Group is here to help you navigate the Social Security disability system as it currently stands. We are also here to keep you informed regarding any updates as they come in. Contact us today.