ADP, the biggest U.S. payroll service, won’t implement Trump’s ‘tax holiday’ for some clients
ADP, which processes the paychecks of millions of Americans, has decided it will not offer certain clients a means to implement a controversial White House dictate to stop collecting a 6.2% Social Security levy.
“ADP TotalSource has decided to not take part in the deferral, and it will not be an option for any client or employee,” said an ADP staffer in an email seen by Fortune.
An ADP spokesperson told Fortune that clients who use its TotalSource product will not have an option to take part in the deferral, but other clients will be able to suspend the Social Security collection at their discretion. The spokesperson added that 13,000 firms use TotalSource and that the arrangement puts responsibility for federal tax liability and penalties on ADP.
The decision comes amid widespread pushback against the White House plan by U.S. businesses, including the Chamber of Commerce, which recently described it as “unworkable.”
President Trump issued the executive order to suspend the collection of the 6.2% payroll tax in mid-August as part of a series of proposed measures to stimulate the economy. But critics quickly pointed out that the President doesn’t have the authority to raise or lower taxes—the Constitution reserves that power for Congress—which means that employees would have to repay the deferred taxes months later.
Trump’s order also presents an administrative headache for employers, which would have had to change their payroll operations and explain the significance of the changes to their workers.
ADP, which serves more than 800,000 businesses, published a guide for employers last week that suggests explaining to employees that Trump’s order is simply a tax deferral and not a tax cut.
Individual employers could unilaterally implement the payroll order by switching to another payroll provider, or carrying out the task themselves, but it is unlikely that many will do so, especially as the order has received little support in Congress or from organized labor.
Meanwhile, the U.S. government is slated to impose the payroll tax deferral for its employees in mid-September, a move that’s led critics to charge federal workers are being treated as a “guinea pig.” The head of an organization representing such workers blasted the decision as a “scam that leaves workers with a substantial tax bill right after the holiday season,” according to the Washington Post.
The plan to impose the order on federal workers also reportedly applies to 1.3 million active duty military members, with no ability to opt out.
While President Trump has suggested Congress could forgive the tax deferral by means of legislation, there is no indication that will happen for now.
The Treasury Department did not immediately respond to a request for comment about ADP’s decision not to implement the order. Intuit, one of ADP’s largest competitors, did not state whether the company plans to make a similar decision.
This story has been updated to clarify the nature of ADP TotalSource.
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