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Payroll Taxes Were Deferred by President Trump

Posted on September 10th, 2020
Posted by Annie Kelsey

The IRS issued guidance, (Notice 2020-65) , on August 28, 2020 and  implemented President Trump’s Presidential Memorandum on the deferral of the withholding, deposit and payment of the employee share of social security tax for the period from Sep 1, 2020 through Dec 31, 2020.

We anticipate further guidance from the IRS on the matter of this Notice.

The relief described in the Presidential Memorandum is confirmed by the Notice that it is a deferral, NOT a tax break.

Payroll Taxes are Deferred until April 30, 2021

The responsibility to pay payroll taxes for wages paid from September 1 – December 31, 2020 are postponed until January 1, 2021 ending April 30, 2021.

The deferred taxes on wages are to be withheld and collected from wages paid, including normal payroll taxes on their wages during the beginning period of 2021.

Penalties, interest, and additions to tax are to begin accruing on May 1, 2021 on any unpaid payroll taxes.  The burden remains on the employer to pay the deferred tax before May 1, 2021.

The payroll tax deferral is applicable to any employee’s pre-tax wages payable on a pay date within the period of September 1- December 31, 2020 for a bi-weekly pay period that is less than $4,000 or equivalent amount with regard to other pay periods.

Eligibility

The eligibility for this deferral is prepared on a pay period-by-pay period basis.  An employee can qualify for one period and not the next. This can occur for instance if an employee receives a bonus that places the employee above the threshold, but can be eligible again in a subsequent period.

It seems employers can regulate whether or not to partake in this payroll tax deferral initiative. It is left unclear if employees can opt out if their employer implements the program.

The Notice, however, is not intuitive of what occurs to employees which leave their employer. If needed, it does note employers can make agreements to collect on deferred taxes from employees.

The Trump administration wants these deferred taxes to ultimately be forgiven, this is reliant on the upcoming Presidential and Congressional election.


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