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Payroll Tax Deferral Guidance Issued

Posted by Admin Posted on Sept 02 2020

The US Treasury and IRS recently provided guidance on the payroll tax deferral issued in President Trump’s August 8 executive memorandum. Some of the key points include:

  • Employers that must withhold old age, survivors, and disability insurance tax (OASADI) and have been impacted by COVID-19 may choose to defer withholding for the period of September 1, 2020, through December 31, 2020. This deferral is not required.
  • Employers now have from January 1, 2021, through December 31, 2021, to repay the deferral as per the CCA 2021.
  • If the deferral is taken and the employee leaves the company prior to April 30, 2021, the employer may make other arrangements to collect the deferred tax.
  • Employees earning more than $4,000 per bi-weekly pay period are not eligible for deferral. However, this is determined on a per pay period basis, so the employee could be eligible if earnings drop below $4,000 for a pay period.
  • This deferral does not apply to self-employed individuals.

 

Choosing whether to use this deferral program depends on many factors:

  • The cost, time and challenges of setting this up in your payroll system
  • The eventual increase in withholding for your employees when the repayment period beings
  • The challenge of collecting the deferral for any employees who may leave prior to April 30, 2021

If you need guidance, please reach out, and a member of our team can provide assistance specific to your situation.

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