On Tuesday, Sept. 1, President Trump’s memorandum deferring payroll tax obligations went into effect.
According to ABC’s general counsel, Littler Mendelson P.C., this memorandum allows for the deferral of the employee portion of federal payroll taxes — 6.2% for social security and 1.45% for Medicare — from Sept. 1, 2020, until Dec. 31, 2020, for workers earning less than $4,000 on a biweekly basis or $104,000 annually. Under the guidance issued, an employer may elect to defer the payment of the employee portion of these taxes on “applicable wages” until next year, when they would be owed in installments between Jan. 1, 2021, and April 30, 2021, unless Congress acts to waive the repayment requirement. Tax experts have said the guidance leaves a number of key questions unanswered, such as what happens if an employee leaves a company before April 30, and how the guidance applies to seasonal workers and employees with irregular hours.
With the repayment requirement in place and the order voluntary, it seems that many employers will likely decline to implement a deferral for employees and continue to withhold the payroll taxes required by law.
For more information about this memorandum, you can read this guidance from the U.S. Treasury Department or this guidance from Littler.