New Guidelines for Deferring Payroll Tax Obligations During COVID-19 Disaster
New guidelines for deferring payroll tax obligations during COVID-19 disaster. On August 8, 2020, President Trump issued a Presidential Memorandum (Notice 2020-65) directing the Secretary of the Treasury to use his authority pursuant to section 7508A of the Internal Revenue Code to defer the withholding, deposit, and payment of certain payroll tax obligations, deferring the same tax deadlines faced by employers affected by the ongoing coronavirus pandemic.
“This modest, targeted action will put money directly in the pockets of American workers and generate additional incentives for work and employment, right when the money is needed most.”[i]
What is Notice 2020-65?
Here’s a brief overview. Beginning September 1, 2020, employers that withhold and pay employee’s Social Security tax on bi-weekly wages less than $4,000 (or an equivalent amount, for example, $2,000 if paid weekly) may defer withholding and payment of the employee’s portion of the Social Security tax starting September 1, 2020 to the pay period January 1, 2021 to April 30, 2021. Please note, this is an opportunity to delay, it is absolutely not an opportunity for forgiveness!
- Compensation earned prior to September 1, 2020 can be included if it is paid to the employee after September 1, 2020.
- The $4,000 (or equivalent amount) threshold is applied on each pay period separately.
- The withholding due dates have changed, not the deposit timing rules once they are withheld.
- The deferred taxes, if this opportunity to defer is employed, will need to be withheld and paid in early 2021, the employer will be held responsible for payment of all deferred taxes ratably, not as a percentage of employee’s income. It is unclear what options the employer has if the employee leaves their employ before April 30, 2021.
Do Significant Questions Still Remain?
Yes, at time of printing, it is still unclear if these changes are voluntary or if mandatory on the part of employers. Additional guidance is still required and expected from the IRS and Treasury as many questions are left unanswered.
Who Authored of Notice 2020-65?
The principal authors of this notice are attorneys of the Office of Associate Chief Counsel, Employee Plans, Exempt Organizations, and Employment Taxes, with the participation of staff from other offices. For further information regarding the guidance under this notice, please call the Notice 2020-65 Hotline at (202) 317-5436 (not a tollfree number).[ii]
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