Enlisted service members who live from paycheck to paycheck could face financial hardships starting in January when they have to repay the extra money that they will receive for the rest of this year.

Some senior enlisted leaders are starting to warn troops that they need to set some money aside to help repay the Social Security tax or they will be in dire straits in 2021.

“My advice to soldiers is, don’t spend the money if you don’t have to,” Sgt. Maj. of the Army Michael Grinston told Task & Purpose. “If you do spend the money, have a financial plan in place for January through April 2021 when the money will be recouped. Leaders need to be engaged with their soldiers and have a conversation about their finances. Soldiers should make informed decisions which starts with looking at their Leave and Earnings Statement.”

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In response to the novel coronavirus (COVID-19), Presidential Donald Trump issued an Aug. 8 memo that ordered the Internal Revenue Service to stop withholding Social Security tax from the paychecks of all enlisted service members, certain officers, and Defense Department civilian employees from mid-September through the end of 2020.

“The President put forward this action to give relief to all Americans during this pandemic – as an employer, the Executive Branch is implementing the deferral to give our employees relief as quickly as possible, in line with the Presidential memo – the President took action when Congress didn’t,” said Rachel Semmel, a spokeswoman for the Office of Management and Budget.

While Trump’s action will temporarily inflate enlisted service members’ paychecks for the rest of this year, they will owe the IRS even more money next year because the Social Security tax is simply being postponed, not forgiven.

That means enlisted service members will get smaller paychecks for the first four months of 2021, and if they blow through all of their extra money between now and the end of the year, they will be strapped for cash when it comes time to repay the Social Security tax.

“Pursuant to current Department of Treasury and Internal Revenue Service Guidance, total deferred Social Security taxes must be withheld from wages beginning January 1, 2021, and ending on April 30, 2021,” according to the Defense Finance and Accounting Service’s website.

As of Wednesday, the DFAS website does not have any information about how much extra money will be withheld from service members’ paychecks next year.

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With the Pentagon’s top leaders silent about the issues so far, the task of letting troops know that they need to start planning now for the lean times ahead has largely fallen on the shoulders of senior enlisted leaders, such as Chief Master Sgt. of the Air Force JoAnne S. Bass.

Bass tweeted this week that noncommissioned officers need to keep tabs on airmen and their families to help prevent financial problems that they may face in the future.

“Every airman and family has a different financial situation,” Bass said in a statement on Wednesday. “We encourage all of our leaders, at every level, to engage with their airmen so that those airmen can make the best financial decision for them and their family.”

Other senior enlisted leaders stressed similar themes when advising servicemembers about preparing for 2021. 

Master Chief Petty Officer of the Navy Russell Smith advised sailors to treat the extra money they get this year as “an advance pay loan,” in that they will have to pay it all back in the first part of 2021, Smith said in a statement to Task & Purpose.

“As such, sailors should carefully manage this additional stipend in order to avoid creating a hardship situation for themselves,” Smith said.

The Navy offers enlisted sailors a variety of resources to help prepare to repay the Social Security tax, including financial specialists at the unit level and certified financial planners at Fleet and Family Readiness Centers, he said.

“Sailors should avail themselves of any and every opportunity to wisely manage their pay, in addition to this loan, enabling them to find greater financial success and a more comfortable and resilient savings account in the future,” Smith said.

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The Marine Corps trusts Marines to apply the lessons that they have learned since recruit training about how to manage money, Sgt. Maj. of the Marine Corps Troy E. Black told Task & Purpose.

“Leadership is there to support Marines by supervising and ensuring comprehension at all levels,” Black said in a statement. “Exercising financial responsibility is every Marine’s duty. Marines are encouraged to budget and plan now to pay back the upcoming temporary tax deferment that was authorized to offset any financial impacts brought on by the COVID-19 pandemic.”

Likewise, the commander of Navy Reserve Forces Command sent out a message to the force on Tuesday advising sailors and civilians to “plan ahead before spending the extra money in your paycheck.”

National Guardsmen are encouraged to work with their leadership as well as resources in the civilian world to help with their financial planning, said Chief Master Sgt. Tony Whitehead, the senior enlisted advisor to the National Guard Bureau.

“All full-time military members and civilians working in the National Guard have been made aware they may be required to repay the deferred Social Security tax next year and to plan accordingly based on rank and grade,” Whitehead said in a statement to Task & Purpose. “As we continue to work with our traditional service members, we will do everything possible to help them to answer any questions they have.”

The Coast Guard announced on Sept. 4 that about 38,000 active-duty members and roughly 5,600 civilians would be affected by the Social Security tax deferral starting in mid-October. There is no way for affected Coast Guardsmen and civilians to opt-out of the deferral.

“Remember, the Coast Guard has financial resources, including financial coaches to help you with this change,” a service news release says. “The Coast Guard is also expanding its personal financial management program, including adding staff in every district to help with your personal financial plan. The program also offers a financial management resource fact sheet and information on the Blended Retirement System (BRS), including a BRS comparison calculator.”

The senior enlisted leader for the U.S. Space Force could not be reached for comment.

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