On August 8, 2020, President Donald Trump signed an order instructing the US Department of the Treasury (the Department) to defer from collecting certain payroll taxes from wages earned between September 1, 2020, and December 31, 2020. The IRS recently responded by issuing Notice 2020-65 providing limited guidance on implementing the Order.
The Notice details that:
- Employers are released from their obligation to collect and pay payroll Social Security taxes for individuals who receive “applicable wages.” “Applicable wages” are defined as compensation that is less than $4,000 for a biweekly pay period, or “the equivalent threshold amount with respect to other pay periods.”
- Employers must determine if there are applicable wages every pay period between September 1, 2020, and December 31, 2020.
- Employers will need to collect any taxes that were deferred between September 1, 2020, and December 31, 2020, and remit those taxes to the IRS between January 1, 2021, and April 30, 2021, unless the Department can find a way to eliminate the obligation to pay the deferred taxes.
- Interest, penalties, and tax additions will begin to accrue on May 1, 2021, for any deferred taxes that have not been paid.
- Employers will need to pay the deferred taxes in addition to collecting and remitting the taxes that are regularly due during the January 1, 2021, to April 30, 2021, pay period, and make arrangements with affected employees to collect the deferred taxes in 2021.
Employers Next Steps
- You should decide if you wish to opt into the tax deferment, and subsequently educate your employees on the program as well as inform them of their tax obligations for 2021 if they choose to defer their taxes.
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This content is provided with the understanding that HR Knowledge is not rendering legal advice. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. The material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. You should review applicable laws in your jurisdiction and consult experienced counsel for legal advice. If you have any questions regarding this content, please contact HR Knowledge at 508.339.1300 or email us.