Payroll Tax Deferral – What Should I Know?

We’ve started to receive many questions regarding the President’s executive memorandum on deferring payroll taxes for employees. Like most programs coming out of the government these days, we know very little about how the program will actually work. Below I lay out what we know and what we need more information on (both employers and employees).
The memorandum states the following:
  • The deferral is for the period September 1, 2020 through December 31, 2020
  • The deferral only applies to social security taxes (6.2%)
  • The deferral is eligible for those earning a biweekly income of $4,000 or less (equates to $104,000 annually)
  • This is a only a deferral, which means the obligation must be repaid at some point in the future
What do we need clarity on:
  • Is the deferral required or optional?
  • Further definition related to the $4,000 biweekly income rule
  • What funds will be used to pay the deferred payroll taxes in 2021?
  • Can payroll providers be ready by September 1 with updated technology and platforms to accommodate these changes?
  • Does this memorandum affect existing payroll tax credits that exist under the CARES Act and the FFCRA Act
  • What is the due date for deferred taxes?
  • How will self-employed individuals or those not paid via W-2 wages be treated?
The memorandum also states, “The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.
As I said above, we know very little about how this program will be implemented. We will wait for the Treasury Department to issue the details. They have two weeks to put together an implementation plan and communicate to employers and employees throughout the country. Clearly this is a monumental task. As we learn more about this program, we will get updates to you as quickly as possible.
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