A Few Feds Might Be Eligible for a Bigger Tax Refund from Trump’s Social Security Tax Deferral

The Internal Revenue Service recently sent every federal employee a form for filing a corrected tax return in connection with then-President Trump’s controversial decision to defer Social Security taxes for a portion of 2020, but most feds won’t need to do anything.

In August 2020, Trump instructed federal agencies that they must make use of his authorization of a deferral of Social Security taxes between September and December of that year for federal workers making $4,000 or less per pay period, drawing outcry from federal employee groups. As a result, the Social Security tax payments that feds missed during that period were taken out of their paychecks over the course of 2021.

In the latest development from the saga, the IRS sent W-2c forms to federal workers that outline how the deferred tax from 2020 was repaid in 2021. According to guidance from the IRS, federal employees who only had one job during the period when their Social Security taxes were deferred do not need to take any further steps.

But federal employees who made less than $137,700 in gross wages in 2020 and had a second or third job could be eligible for an additional tax refund. That’s because if the wages from that second or third job put the employee over the $4,000 in total wages per pay period, they were no longer eligible to have their taxes deferred, although their employing agency could not have known they were over the limit.

So, if a federal employee’s recently issued W-2c says in box 4 that an employee’s Social Security tax withheld by all employers exceeded the maximum amount of $8,537.40, they should file a Form 1040-x, which is an amended tax return. Doing so will grant them a tax refund for the excess Social Security taxes that they had withheld over 2021 to pay back the money that was mistakenly deferred.