Many employers provide a vehicle to employees for their use during working hours. However, that...
Payroll Tax Deferral Option
On August 8, 2020, President Trump issued a presidential memorandum, authorizing employers to defer collecting and paying the employee portion of federal payroll taxes (only the 6.2% for Social Security) from September 1, 2020 until December 31, 2020. On Friday, August 28, the IRS issued guidance around the program which became effective today.
Employers are permitted to defer the collection and payment of these taxes, but are not required to do so. The deferred payroll taxes will then be collected from employees’ pay in installments between January 1, 2021 and April 30, 2021. This potential deferral applies only to any employee whose pretax wages during any biweekly pay period generally is less than $4,000. Employees may not defer these taxes unless their employer elects to participate in the program. Repayment of these amounts is the responsibility of the employer, whether or not the employee is still with that company.
At present, there are no concrete plans for forgiveness of these payroll taxes. The President has the ability to defer payment of taxes but Congress must vote to eliminate the taxes. Unless Congress takes action, the deferral is instead equivalent to a temporary loan.
Due to the complexities of this program, and the associated increase in tax payments for next year, we do not expect many of our clients to opt into the deferral program.
Please contact us if you have any questions about this program.