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On August 8, 2020, President Trump issued a Memorandum to the Secretary of the Treasury directing him to implement guidance for delaying the collection and payment of the employee portion of the payroll tax under the following conditions:
- September 1 to December 31, 2020. Employers may elect not to withhold and deposit the employee’s 6.2% Social Security tax on wages paid during September 1, 2020 to December 31, 2020 for eligible employees. To be clear, this does not relieve an employer from withholding or paying the employee’s 1.45% Medicare tax or the employee’s federal income tax obligation, and the employer must continue to pay its portion of the 7.65% FICA tax.
- Eligible Employees. Eligible employees are those whose bi-weekly pre-tax compensation is less than $4,000 (a/k/a $104,000 per year).
- Optional. Participation in this program is optional.
Neither the President or Secretary of Treasury can eliminate the obligation to pay this tax. Therefore, under the current law any amount deferred must ultimately be paid to the IRS at a currently unknown date in the future.
President Trump has stated that if he is re-elected, he will “terminate” the repayment of all amounts that were deferred. However, even if reelected there is no guarantee that Congress will pass legislation to forgive the deferred taxes. If these taxes are not forgiven employees could be placed in the position of having to repay the amounts that were included in their paychecks between September 1, 2020 and December 31, 2020.
Ultimately, this memorandum raises more questions than it answers. Watch for an additional update from Kemp Smith when the Treasury Department issues additional guidance.
If you have any questions, please feel free to contact Kemp Smith’s Business Department at 915-533-4424.
President Trump has stated that if he is re-elected, he will “terminate” the repayment of all amounts that were deferred. However, even if reelected there is no guarantee that Congress will pass legislation to forgive the deferred taxes. If these taxes are not forgiven employees could be placed in the position of having to repay the amounts that were included in their paychecks between September 1, 2020 and December 31, 2020.
Ultimately, this memorandum raises more questions than it answers. Watch for an additional update from Kemp Smith when the Treasury Department issues additional guidance.
If you have any questions, please feel free to contact Kemp Smith’s Business Department at 915-533-4424.
