Late Friday night, the Treasury Department released guidance to employers on implementing the payroll tax deferral under President Trump’s Presidential Memorandum. On Aug. 8, 2020, the President directed the Secretary of the Treasury to defer the withholding, deposit and payment of certain payroll taxes. Specifically, the memorandum allowed deferral of payroll taxes for employees making less than $4,000 bi-monthly or $104,000 per year.
Under the released Treasury guidance, employers are not required to withhold and deposit any part of an employee’s portion of social security during the deferral period of Sept. 1, 2020 to Dec. 31, 2020 (Temporary Deferral). After the deferral period, an employer is required to withhold and deposit the Temporary Deferral portion between Jan. 1, 2021, and April 30, 2021, in addition to the withholding and deposit of wages under Section 3102(a) of the IRC. If an employer fails to withhold and deposit the Temporary Deferral, interest and penalties will begin to incur after April 30, 2021.
Employers who choose to implement this payroll tax deferral should continue to proceed cautiously. Payroll taxes, under existing law, continue to remain subject to joint and several liability. This means that the government may attempt to collect the tax liability from either the employer or the employee. Therefore, if an employer fails to withhold and collect the Temporary Deferral, they may be responsible for the unpaid payroll taxes.
If you have any questions regarding this executive action or the impact it may have on your business, reach out to Demetrius Robinson (firstname.lastname@example.org / 614.427.5749).