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You're getting a raise on September 1! But there's a catch...

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Payroll tax cut will go into effect on September 1, but as of now, it has to be repaid.

Workers are getting a raise on September 1! But there's a good reason you should save the money rather than spend it; you will probably have to pay it back. 

Will this be a tax cut or a deferral?

Will this be a tax cut or a deferral?


LOS ANGELES, CA (California Network) - American workers are going to see bigger paychecks starting on September 1. That is the day when President Trump's executive order to defer the payroll tax will take effect. On that day, the IRS will stop collecting these taxes from your check. 

Both workers and employers are liable for these taxes, with each party paying half. However, without the IRS collecting these taxes, the money will be paid to the worker who earned it. This will give workers a nice raise with each check. It will reward those who are working and add incentive for the unemployed to find work. But there's a catch. 

The problem with the President's executive order is it isn't permanent. Under his authority, President Trump can only defer the collection of the taxes. A congressional law needs to be passed to make the cuts permanent. Otherwise, the deferred taxes will have to be repaid when tax time comes. 

President Trump has pledged to make the cuts permanent if he wins reelection. However, it will still require the cooperation of the legislature. 

For now, experts advise workers to save the money, since it is likely it will have to be repaid. Putting the money into savings could generate a tiny bit of interest, but probably not enough to make much difference. Another strategy might be to pay off interest-bearing debt with the extra income, to save debt later on. This is practical if a worker plans on getting enough of a tax rebate back, or will earn enough to cover the bigger tax payment in April. However, most workers who are likely to pursue this strategy are already managing their taxes to minimize their rebate and keep interest bearing debts low. 

For most workers, the money will be spent and the pain of repaying it will arrive in the spring. 

So far, Congress has failed to agree on a stimulus package to help the American people. Rent protections have expired, and the President's eviction moratorium isn't in fact a moratorium at all. At this time, people can still be evicted, including those who cannot pay their mortgage. As of August 1, about 30 percent of US households had past due housing payments. 

Unless Congress can get past their differences, September will turn into a difficult month and millions of people could face homelessness and hunger. What that will do to the nation is unfathomable. 

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