Payroll tax deferral guidance
President Trump signed an Executive Order on August 8, 2020, and Treasury issued guidance on August 28, 2020 regarding the deferral of social security tax withheld from the paychecks of employees.
The ability to defer withholding of social security tax from individual employees, which is non-binding on employers, starts September 1, 2020 and ends December 31, 2020. Individual employees whose compensation is less than $4,000 on a bi-weekly basis, or equivalent threshold amount with respect to other pay periods (translates to an annual salary of $104,000), qualify for the deferral of social security taxes. The threshold is determined on a pay-period by pay-period basis.
For employers who opt to participate in the deferral program will be required to collect the deferred social security taxes from employees and remit the taxes to the IRS between January 1, 2021 and April 30, 2021. The responsibility to collect and remit the deferred taxes falls on the employer. While an employer and employee may make any arrangement necessary to collect the deferred taxes, it is encouraged to withhold the deferred taxes ratably over the period from January 1, 2021 to April 30, 2021. Interest and penalties will begin to accrue on May 1, 2021 for any unpaid balance of the deferred tax.
The guidance issued by Treasury can be found here.
If you have any questions or concerns related to the deferral of employment taxes, do not hesitate to reach out to your local SEK office.