New Executive Order provides Payroll Tax Deferral for Certain Workers – What does this mean for you? – *UPDATED* for IRS Notice 2020-65
In response to stalled negotiations between the House and Senate on the next round of legislative coronavirus relief, President Trump issued four Executive Orders seeking to reignite negotiations and provide some immediate relief. Trump’s action included orders to address enhanced unemployment payments, eviction moratoriums, student loan relief, as well as providing a payroll tax holiday for some (link to our initial executive order update here along with this additional information).
It is no secret that the Trump administration has supported a payroll tax holiday as one of the measures to provide immediate relief to workers during the COVID-19 pandemic so it was not a big surprise to see a payroll tax deferral order among the orders signed by the President earlier this month. More specifically the order calls for a deferral of payroll taxes from September 1, 2020 to December 31, 2020 for certain workers generally making $100,000 per year or less. This payroll tax deferral raises many questions for employers and their employees when it comes to what paychecks may look like through the rest of thus, it will be up to Congress to decide if the liability of taxes will merely be pushed off until after year-end or be among the benefits provided to employees as a result of future legislative actions.
While the implementation of these orders are still uncertain, the attached summary outlines some of the questions the new payroll tax deferral order raises and highlights the need for guidance. Early Friday evening the IRS released Notice 2020-65 which provides limited guidance relating to the applicable wage thresholds and timing for remittance of deferred withholding but still leaves so many unanswered questions. Payroll service providers are currently notifying customers of preparations to modify systems to defer the employee 6.2% social security tax. We hope to see more clarity on the horizon and will continue to keep you informed of any new developments.
