What You Need to Know About the Deferral of Payroll Tax Obligations

Kirsch CPA Group

Sep 15, 2020

Our office has received numerous inquiries about President Trump’s recent memorandum. On August 8, 2020, President Trump signed an executive order allowing an elective deferral of the 6.2% employee share of Social Security tax. The deferral period runs September 1, 2020 to December 31, 2020. The deferral is only available to employees who have bi-weekly pay less than $4,000 or $104,000 on an annual basis.

The decision to defer the payment of the employee’s share of Social Security tax rests with the employer and is not mandatory. At this point, it appears implementation and administration of the payroll tax deferral may outweigh the benefits. Here are the details for you to consider:

The deferred social security tax will be repaid during the time period ranging from January 1, 2021 to April 30, 2021 via remittance by the employer
The employer is required to withhold additional payroll tax withholdings from the employee to pay the deferred amount
There are many unanswered questions pertaining to the deferral of payroll taxes. (i.e. who is obligated to re-pay the deferred portion if an employee terminates employment)