Payroll Group Proposes Alternative to Tax Holiday

While Congress is mulling over the possibility of offering a holiday from Social Security tax [1] for the month of January as an impetus to stimulating the economy, the American Payroll Association warns that such a tax hiatus would wreak havoc with payroll tax return filing requirements, payroll calculations, and payroll software programs.

"This is not a political assessment, but one based on the realities of processing payroll and maintaining compliance. It is likely that employers, software developers, and payroll service providers would not be able to make the necessary modifications to implement the proposed payroll tax holiday by December 2001 or January 2002," suggested Dan Maddux, executive director of the 21,000-member association.

Instead, the group suggests that a modification to income tax will be much less devastating for employers and software engineers. Income tax withholding is allowed to vary during the year without throwing tax accounting systems into turmoil. Mr. Maddux fears that changes to calculating and reporting Social Security tax might require months of programming, and to implement such a change during January would require man hours that simply aren't available during the busiest time of the year for payroll tax managers.