On August 8, 2020, the President issued a Presidential Memorandum to allow employers to defer withholding of the employee’s share of Social Security tax (6.2%). On Friday, August 28, 2020, the IRS and Treasury Department issued Notice 2020-65, which contains initial guidance on the payroll deferral.
Points to consider when making the decision on whether to defer:
- Currently, the amounts deferred must be repaid, as Congress must act for any amounts deferred to be forgiven
- Administrative costs will increase
- Many payroll systems have not updated their system to implement this deferral
- Consider messaging to employees on the decision of whether to participate in the program as many employees might not realize this is only a short-term deferral and any increase in their wages will be offset by a decrease in 2021
- The employer is ultimately responsible for ensuring that the deferred taxes are repaid
- There is a risk that Congress might only address actual amounts deferred in any forgiveness legislation
If you have questions, please contact your Jones & Company, Ltd. accountant.