President Trump's Executive Order Delaying Payroll Taxes Essentially on Hold

On August 8, 2020, President Trump issued an executive order deferring the due date for certain employee payroll taxes in light of the ongoing COVID-19 pandemic.  The order allows, but does not require, deferral of the withholding, deposit and payment of Social Security taxes for wages paid beginning September 1, 2020 through December 31, 2020, subject to the following conditions:

 (a)    The deferral shall be made available with respect to any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.

 (b)    Amounts deferred pursuant to the implementation of this memorandum shall be deferred without any penalties, interest, additional amount, or addition to the tax.

Unfortunately, the U.S. Treasury Department has not yet provided guidance on how companies are to implement and report the deferral.  There are many questions related to how the income limit will work as well as the employer reporting requirements.  Due to the lack of guidance, many companies have not yet committed to implementing the tax deferral.

According to the U.S. Chamber of Commerce, many companies are unlikely to implement the deferral, even with the IRS guidance, because it forces a large tax bill on employees in the future and would be very difficult for employers to administer.

“Further, the lack of concrete guidance on the most basic of implementation issues presents an untenable situation, making it basically impossible for employers to implement this EO and leaving little choice but for those employers to continue remitting payroll taxes to the Treasury,” Caroline Harris, the Chamber’s chief tax policy counsel, said in a statement.

If you have any questions related to this payroll tax deferral, as well as any other COVID-19 pandemic relief, please do not hesitate to contact us.