JOINT BASE CHARLESTON, S.C. -- Defense pay officials have noted an increase in questions regarding the Social Security tax deferral program started earlier this month and are providing additional details - especially how it relates to Reserve and Guard pay. The following information is from the Defense Finance Accounting Service.
Difference in tax deferral process for members paid in DJMS-RC vs DJMS-AC:
Due to differences in pay systems, the application of the tax deferral process will be different for most members of the National Guard and Reserve in the Army, Air Force, or Navy than for active component members.
For these members, if they are eligible for the tax deferral based on their monthly pay rate, the members’ initial net pay may not have the Social Security taxes withheld. Typically within four business days, a separate pay transaction will be processed to refund the Social Security taxes. This will also result in these members receiving an additional Leave and Earnings Statement in MyPay with an entry labeled “FICA Refund” reflecting the refunded Social Security tax amount.
Military members are not eligible to opt-out of the deferral if their Social Security wages fall within stated limits. The deferral will happen automatically.
Per current IRS guidance, collection of the deferred taxes will be taken from military member’s wages between Jan. 1 and April 30, 2021. If a military member separates or retires in 2020 before the Social Security tax can be collected in 2021, they are still responsible for the Social Security tax repayment. Additional information on the collection process will be provided in the future.
Note: There is a small percentage (about 2%) of members being paid on DJMS-AC that should have had their taxes deferred at mid-month but will not. The reason the taxes weren’t deferred is that if a tax affecting transaction is processed in DJMS on the last day before cutoff, it “reverses” the deferral action on that account. If you have a customer that calls and did not get the deferral and they should have (based on their grade), all they need to do is wait until the end of month pay. The system will defer the entirety of the months OASDI taxes in the end of month payment.
Overall information, FAQs and Fact Sheets are located at:
https://www.dfas.mil/taxes/Social-Security-Deferral