|On Friday, August 28, 2020, the Department of Treasury and Internal Revenue Service issued the awaited guidance (Notice 2020-65) regarding payroll tax deferral ordered by President Trump on August 8, 2020. This notice will allow employers to defer withholding and payment of the employee’s portion of the Social Security tax “OASDI (Old Age, Survivors and Disability)” and Railroad Retirement Act Tier 1 Tax on certain wages. The deferral is on applicable wages below $4,000 on a bi-weekly basis (or the equivalent amount for other payroll periods) paid between September 1 and December 31, 2020.|
Some payroll companies have opted not to offer this deferral as an option to most of their clients. Many publicly traded companies have also opted not to participate. It has been suggested that President Trump’s executive order is not a tax cut but simply a tax deferral that will not allow for forgiveness. Beginning January 1, 2021, it is the employer’s responsibility to recover and pay back the deferred taxes from the employees. These amounts must be remitted by April 30, 2021 or will be subject to penalties, interest and additions to tax which will begin to accrue on May 1, 2021 for any unpaid amounts.
It appears that there are still several unanswered questions and more clarification is needed on this topic.
Click here to read more about this guidance.
Source: Internal Revenue Service