Optional tax deferral program is not for everyone
On August 8, 2020, President Donald Trump signed a presidential memorandum directing the Secretary of the Treasury to use his authority to defer the withholding, deposit and payment of taxes to Social Security from September 1, 2020 through December 31, 2020 for employees making less than $104,000 a year. Employers are still required to pay their portion.
According to IRS Notice 2020-65, the employee Social Security tax deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately. No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a bi-weekly pay period.
The deferred taxes must be withheld and paid ratably per pay period for affected employees between January 1, 2021 and April 30, 2021 or interest on the amounts will accrue starting May 1, 2021. While the Treasury Department can encourage employers to withhold the taxes, it cannot mandate that they do so.
Our CPAs do not recommend utilizing this tax deferral at this time. This article is meant to apprise our clients of this optional program. If you are considering this tax deferral, you should contact your accountant immediately to discuss the possible issues that could arise.
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