Payroll Tax Deferral Guidance

September 2, 2020

On August 28, the Department of Treasury and Internal Revenue Service released guidance (Notice 2020-65) that implements President Trump’s recent memorandum directing the Secretary of the Treasury to allow employers to defer certain payroll taxes if they so choose. The deferral applies to wages or compensation paid from Sept. 1 through Dec. 31, 2020.

Employers that defer the tax collections from Sept. 1 through year’s end will need to collect unpaid taxes from that period starting on Jan. 1 and remit them by April 30.

The guidance allows employers to defer withholding and paying the employee portion of the Social Security payroll tax if the employee’s wages or compensation during any bi-weekly pay period generally are less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay cycles.

“Certainly, payroll tax relief can help in the near-term, but this guidance lacks clarity on how businesses would treat employees who left during the deferral period,” stated Todd McCracken, President and CEO. “To make this tax relief meaningful, it is necessary that employers are protected from excessive reporting requirements as well as being left holding a tax bill for employees they no longer employ.”

Additional tax relief related to the COVID-19 pandemic can be found on IRS.gov.