Presidential Memorandum on Payroll Tax Deferral

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Please note: This blog is current to the date of its publication, Monday, Aug. 17. For additional updates or assistance navigating these uncertain times, please contact us or visit our SST COVID-19 resource page.

 

A recent memorandum signed by President Trump earlier this month defers the payment of the employee portion of federal payroll taxes (6.2% for Social Security for 2020 wages up to $137,700) paid during the period of Sept. 1, 2020, through Dec. 31, 2020. The document states:

“The withholding deferral is to apply only with respect to employees with wages or compensation payable during a biweekly pay period that generally is less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.”

This would equate to total annual taxable wages of $104,000 or less.

Additionally, per the memorandum, “the amounts deferred are to be without penalties, interest or additions to the tax” and 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.”

Meanwhile, payroll departments are waiting for clarification on several questions, such as:

  • What does less than $4,000 mean? Does it include solely base pay or all compensation?
  • Are any portion of taxes deferred for employees make more than $4,000 biweekly?
  • Are the employee withholding deferrals required or optional?
  • Will employers be responsible for later withholding and remitting the 2020 employee tax deferrals in 2021?
  • If the employee terminates before tax deferrals are remitted, does the employer have any responsibility for the employee’s deferred taxes?

SST is actively monitoring this update and is committed to delivering the latest news regarding COVID-19 financial assistance programs on our dedicated resource page. For a more in-depth look at your organization’s unique needs, contact us today.

Thanks to SST Payroll & Benefits Supervisor Malisia Vrana for providing the content for this post.

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