In light of the financial struggles that many Americans are facing because of the coronavirus pandemic, the U.S. government passed four stimulus packages, increased unemployment benefits and made direct payments to individuals . The latest attempt to put some extra money in peoples pockets comes in the form of a payroll tax holiday.

Though this tax deferral will help employees take home more money through the end of the year, there are a few drawbacks. Perhaps the biggest? If your employer participates, your paycheck will actually be smaller for the first four months of 2021.

Heres a closer look at how the payroll tax deferral works and what it means for your paychecks.

What Is The Payroll Tax Deferral?

In an August 8 memorandum , President Donald Trump authorized employers to suspend withholding of the 6.2% Social Security tax from the paychecks of workers who earn less than $4,000 per biweekly period, from Sept. 1 through Dec. 31. This would increase the workers take-home pay by the amount of the tax, Neal Stern, a certified public accountant, said.

For example, an employee who earns $2,000 per biweekly paycheck would take home $124 more per check (those who are paid on a different schedule would have their deferral calculated as if they were paid biweekly). At most, workers can expect to bring home an extra $247 per biweekly pay period.

But theres a catch: The payroll tax is not forgiven, its just a deferral.

There is a payback period that will start on Jan. 1, 2021, said Jonathan Barber, senior vice president of tax policy and research at Ayco , a financial services company.

One of the main issues with this is that employees are expected to repay the payroll taxes during whats arguably the most financially stressful time of year.

It might help someone very temporarily, but it might put someone in a worse position, Barber said. Theres concern that having to pay this back at the beginning of the year could be more of a burden than the benefit of this interest-free loan right now.

Its also not up to employees whether or not to participate. Rather, its at the discretion of employers as to whether they want to allow the deferral, Barber said. He added that if an employer does decide to participate, it should educate employees about the implications and how it will affect their cash flow for the next several months.

How The Payroll Tax Deferral Will Affect Your Paycheck

For the companies that do decide to participate, payroll taxes that are deferred through the end of the year will need to be repaid over the first four months of 2021. So while your paycheck would increase between September and December of this year, it would actually decrease by a proportionate amount between January and April of next year, as withholdings for Social Security tax are doubled up until the entire amount is paid back, Stern said.

You can think about the increase in take-home pay from September through December 2020 as a short-term loan that youll have to repay over the first four months of the new year, said Stern, whos a member of the financial literacy commission at the American Institute of Certified Public Accountants.

He noted that Trumps memo directs the Secretary of the Treasury to explore ways to possibly eliminate the obligation for workers to repay the taxes that were deferred. However, that would likely require congressional action far from a certainty.

It makes sense to assume that current law will apply, meaning that higher take-home pay now from deferred Social Security taxes means smaller paychecks in the first four months of 2021, Stern said.

How Many Employers Will Defer Payroll Taxes?

So far, participation among employers has been scarce. Many large companies, as well as the U.S. House of Representatives, opted not to change tax withholdings . However, most federal employers, including the military, will participate.

The upside for employees is small and short-term, and there are only downsides for employers, said Charles Read, chief executive officer for GetPayroll , a payroll and HR services company.

For one, employees who leave a company before January 2021 such as seasonal holiday workers would leave companies on the hook for the deferred taxes. Employers would have to work out an agreement with employees to pay back these taxes before leaving or have them deducted from their final paychecks, if state law even allows it.

We have advised our employers of the risk, Read said. As of now, none have chosen to take on that risk.

Then, theres the additional administrative load of implementing the changes and getting employees up to speed. Read added that methods for reporting the deferral dont exist yet.

Software changes to affect that deferral on the computerized payroll system are not ready, and probably wont be fully tested and mistake-proof for weeks or months, he said. With all the changes that have happened this year, there is no guarantee that, like the [Paycheck Protection Program], things wont change every few days for the rest of the year.

Read said he expects that outside of government organizations, there will be very little participation in the deferral program.