On August 8, President Trump signed a Presidential Memorandum that permits the deferral of the employee portion of Social Security taxes for certain employees due to the COVID-19 pandemic.

Guidance on the Presidential Memorandum related to the deferral of certain payroll taxes was released late Friday. The guidance was brief and leaves many questions.

In summary:

  • An employer is allowed to defer the withholding and payment of an eligible employee’s portion of the Social Security payroll tax. Therefore, offering the deferral is optional to the employer.
  • The tax deferral option is applicable to wages paid between September 1 and December 31, 2020.
  • The deferral applies to an employee for a bi-weekly pay period whose wages are less than $4,000, on a pre-tax basis, or the equivalent threshold amount with respect to other pay periods.   Taxes can be deferred without interest or penalty.
  • Taxes that have been deferred must be remitted by the employer between January 1 and April 30, 2021. Penalties will be assessed starting May 1, 2021 for those amounts not repaid.

We recommend employers and employees who are considering this deferral proceed with caution. Without additional legislation, this may leave a result in a significant tax bill in 2021. Maintaining detailed books and records will be essential to track and remit the proper amounts when due.

If you have any questions about the payroll tax deferral, please contact us.