We published last week that we were still awaiting guidance for the Payroll Tax Deferral and that guidance was released late Friday.
The Presidential Memorandum for deferring the employee portion of Social Security becomes effective tomorrow, September 1st. Limited guidance was released late on August 28th. Highlights are noted below:
- Employers have the option to defer the withholding and payment of the employee’s portion of Social Security tax on wages paid from September 1, 2020 through December 31, 2020.
- Determination of applicable wages is to be made on a per pay period basis.
- Deferral applies to any employee whose pretax wages or compensation are less than the following amounts per applicable pay period.
- Biweekly – $4,000
- Weekly – $2,000
- Semi-monthly – $4,333.33
- Monthly – $8,666.67
- The due date for the withholding and payment of these taxes is postponed until January 1, 2021 through April 30, 2021.
- Interest, penalties, and additions to tax will begin to accrue on unpaid taxes starting May 1, 2021.
Many questions still remain such as how this will effect reporting on the Form 941 through Q2 2021 as well as the W2s for 2020 and 2021. The guidance also does not address what happens if an employee leaves prior to the full amount of the deferred tax being repaid or if an employee is a seasonal employee and may not have enough wages in 2021 to cover the deferred tax.
Current interpretation has the employer being the one responsible for making the payment of the deferred taxes which in turn may leave some employers on the hook to pay without being able to get those funds from an employee. Our experts recommend that you continue as status quo – opting to not participate in the payroll tax deferral and continuing to withhold and pay the employee portion of the Social Security tax.
If you have questions about what the next steps should be for your business, contact our experts today!
