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.