President Trump issued an executive order on August 8, 2020 providing that employers could defer (but not forgive) the employee’s portion of Social Security taxes for certain employees for wages paid between September 1, 2020 and December 31, 2020. The Social Security tax is the 6.2% portion of the employment taxes taken out of employees’ paychecks. Also, President Trump tasked the Treasury Department with providing guidance to implement the order and also to explore ways to eliminate the obligation to pay the deferred taxes.
Generally, the deferral applies to employees who get paid less than $4,000 on a biweekly pay period ($104,000 annually). What is still unknown is whether employees need to choose the deferral or whether it is automatic for all eligible employees. Also uncertain is when the deferred amounts would be required to be remitted to the government, and if those deferred amounts would need to be repaid with the employee’s individual income tax returns as an additional amount due or if the employer would be required to withhold the deferred amounts on future paychecks.
The Treasury Department has informally indicated that the deferral will not be mandatory. However, we are still awaiting guidance from the Treasury Department on how to implement the order. Since September 1 is the stated beginning date, many employers are choosing to wait for the Treasury Department to issue guidance lest the employers be on the hook for any deferred amounts.
Reach out to our team at MWB for any questions you may have.