Keeping this one short, sweet, and to the point.
Yesterday the U.S. Treasury Department released their guidance on how the President’s tax deferral would apply to companies.
There is a key word everyone needs to focus on with this and that word is deferral. While your paycheck might look much nicer, it is important to know that a deferral means you will pay it back at a later time.
This isn’t all doom and gloom. There are things you can do to mitigate the impact of paying the taxes back.
What should you do if your company elects the deferral?
The important thing to do at this time is NOT SPEND THAT EXTRA MONEY! Look at your last paycheck and note how much FICA tax came out. When you get paid, take that amount and put it into a high-yield savings account, do not spend it!
The Fed is hoping this will cause an increase in spending to boost the economy. While this may happen, really consider saving your money and not spending it… yet.
What happens if the Fed forgives the deferral?
This would be the ideal situation for the taxpayer. If the Fed forgives the deferral, you get to keep it. Now your deferral is basically another stimulus check.
Now you can take that money and do whatever you want with it. Since you already did not expect to receive that money, consider investing it. This could be the opportunity for some people that have never invested before, to try their hand at it.
This will only help if you are employed.
This tax deferral will only help people that are currently employed. If you are currently unemployed, you will not see a benefit. This is an emergency action because our politicians cannot come to an agreement on the next stimulus. I am still hopeful that there will be something in the future to help those that are unemployed.
Related: Side Hustles
If you are unemployed and still struggling to find employment, try taking on a side hustle. I know many side hustles cost money to start, but there are many that do not. If you have a car, consider driving for Uber/Uber Eats or Lyft. There are other options as well such as Instacart, Door Dash, and Grub Hub.