​Understanding Deferring Employee Payroll Taxes Through the End of 2020

​Understanding Deferring Employee Payroll Taxes Through the End of 2020

09/1/2020 Tags: Announcements, In the News, COVID-19

President Donald Trump in early August issued an executive memorandum to defer the withholding, deposit, and payment of certain payroll taxes because of the current health crisis.

The IRS recently issued guidance for employers about how to implement the president’s directive.

According to the guidance, employers can defer withholding of an employee’s portion of the 6.2% Social Security tax on wages paid from Sept. 1, 2020, through Dec. 31, 2020. The deferral applies to any employee who makes less than $4,000 biweekly on a pretax basis.

If an employer decides to defer an employee’s portion of the Social Security tax in 2020, they’ll need to withhold and repay that amount in 2021 between Jan. 1 and April 1. Employers can “make arrangements to otherwise collect” the total taxes. Interest, penalties, and additions to tax will start to accrue for the business on May 1, 2021, if the tax isn’t paid.

Essentially, employees would see more on their paychecks from Sept. 1, 2020, to Dec. 31, 2020, and less from Jan. 1, 2021, through April 1, 2021.

However, there is some uncertainty around deferring payroll taxes right now, including:

Because of this uncertainty, we’re recommending that businesses continue to withhold and deposit their payroll taxes until the government issues further guidance.

We’ll continue to monitor the situation and let you know if more guidance comes out. In the meantime, if you have any questions about your business’s unique situation, please let us know so we can offer further guidance.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

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