The Treasury Department and the Internal Revenue Service have released guidance on President Trump’s Executive Memorandum directing the Secretary of the Treasury to defer the payment of payroll taxes from Sept. 1 until Dec. 31, 2020, for employees earning less than $4,000 per pay period (or $104,000 per year).
According to the IRS guidance document, employers may temporarily stop deducting eligible employees’ payroll tax payments from Sept. 1 until Dec. 31, 2020. The deferred payroll tax payments represent employees’ shares of Social Security taxes, in the amount of 6.2% of wages.
If Congress does not enact legislation to forgive the deferred tax liability, employers would have to make these payroll tax payments or collect them from employees during the period from Jan. 1 to April 30, 2021. This could result in double payment (12.4% of wages) during the payback period, or more simply, reduced paychecks to begin the new year.
