NSBA Seeks Clarity on Payroll Tax Executive Order

August 10, 2020

Over the weekend, President Donald Trump issued a series of Executive Orders (EOs) focused on providing ongoing pandemic relief. Among those provisions is one that would implement a temporary deferral of the payroll tax through Dec. 31, 2020. The EO appears to allow employers to hold off on collecting the employee portion of the payroll tax for the remainder of the year when all those taxes would then become due.

Below is a statement from NSBA President Todd McCracken.

“While I applaud the administration’s efforts to provide relief to small businesses—and payroll tax relief can be a very meaningful way to do just that, particularly in labor-heavy and lower-income industries—this EO lacks the details necessary to determine how helpful it really will be.

“Certainly, payroll tax relief can help in the near-term, but requiring the full taxes be paid right around the holidays could serve as a major barrier to utilizing the deferral for many employers and employees. Furthermore, there is no clarity in terms of who ultimately is on the line for submission and payment of those deferred taxes, particularly in cases where an employee leaves the company before those deferred taxes are paid. Will there be an increased paperwork burden on small businesses who must report on the untaxed income of former employees, in addition to regular reporting requirements?

“It is also not clear whether the deferment will be voluntary or mandatory for employers. Will all employers be required to participate? Will it be up to individual employees whether they want their taxes deferred—creating an additional administrative burden on small businesses? We also urge Treasury to produce easy-to-follow rules on which employees would be eligible. Many workers might make more than $4,000 in a given pay period, but far less in another; would the deferral be turned on and off pay-period to pay-period?

“America’s small businesses and the employees, families and communities that rely on them need help; but with the questions outlined above—and others—it is simply too soon to know whether this Order will provide that meaningful help. We urge Treasury to move swiftly to produce rules that clarify these points. We emphasize the need for simplicity as they craft those rules.”