Beginning today, employers can elect to defer the 6.2% Social Security payroll tax of its employees that is normally deducted from a paycheck. This was made possible through the recent executive order from President Trump.
Employers have to make the determination if this short-term employee relief is worth the tradeoff. The deferral only applies to wages paid beginning on September 1 and ending on December 31, 2020. The money will be due to the federal government the first part of 2021 unless Congress acts to deliver permanent relief (which currently seems unlikely).
The deferral only applies if the biweekly compensation (or equivalent amount for other pay periods) is less than $4,000. The determination of whether the deferral applies is made on a paycheck to paycheck basis.
The responsibility is on the employer to withhold and pay any deferred taxes.
Specifically, the IRS guidance on the matter from August 28 states that employers “must withhold and pay the total applicable taxes that the (employer) deferred under this notice ratably from wages and compensation paid between January 1, 2021 and April 30, 2021 or interest, penalties and additions to tax will begin to accrue on May 1, 2021, with respect to any unpaid applicable taxes.”
For more information, view the new two-page IRS guidance document.
Bill Waltz is vice president of taxation & public finance for the Indiana Chamber. He is also an attorney and has been with the organization for nearly 15 years.
