On August 8th, the President issued a presidential memorandum that would allow employers to defer the employee’s portion of payroll taxes.
On Friday August 28th, the IRS issued guidance regarding this deferral.
From Sept 1, 2020 to December 31, 2020, employers can defer the withholding, deposit, and payment of the employee portion of the OASDI tax (typically called the Social Security tax).
HOWEVER – this is just a deferral. Under the guidance, employers will need to start withholding and depositing the deferred tax beginning January 1, 2021 through April 30, 2021. This effectively means that the employee will have double the social security tax withheld (one as a part of the normal payroll, and then the additional amount that was deferred) from January to April 2021.
Additionally, this deferral only applies to any employee whose pretax wages during any biweekly pay period is less than $4000.
There is no guidance for what to do if an employee is no longer employed in 2021 and took advantage of the deferral.
Is this right for you? Give one of our CPAs a call to discuss!