Deferring Payroll Taxes–10 Key Points to Consider before Deciding to Participate

What are the 10 Key Points to consider when employers evaluate if they should participate in the payroll tax deferral issued by President Trump in August?
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1. The deferral may be elected on wages paid during the period of September 1, 2020 through December 31, 2020
2. The deferral applies to the withholding, deposit, and payment of the “employee share” of social security taxes (6.2%)
3. Wages or compensation payable during any bi-weekly period for employees earning less than $4,000 each bi-weekly payroll period (roughly $104,000 annually) are eligible
4. Employers are permitted, but not required, to defer payment on these taxes
5. Currently  taxes may be  deferred, not forgiven, and will be due by the end of April 2021
6. If an employer wants to participate, educating employees on how  funds will be paid back is crucial
7. Employers that implement the deferral after the September 1st effective date cannot defer taxes for payrolls that have already been processed
8. Consult with legal counsel before implementing the program
9. Employees should sign an  agreement about how  funds would be paid back if the employee leaves the company
10. Guidance is silent on if individual employees can “opt out” if the employer participates

 
Because of the need for additional guidance and the challenging administrative responsibilities, many employers are electing not to offer the deferment.

For additional questions, contact us at [email protected].

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