On August 28, 2020, the IRS issued guidance on the employee payroll tax deferral previously announced in a memorandum issued by President Trump on August 8, 2020.
Notice 2020-65 provides employers with the option to defer the withholding and payment of the employee portion of social security tax on wages paid during the period beginning on September 1, 2020, and ending on December 31, 2020. The deferral would apply to any employee earning less than $4,000 each biweekly payroll period, or $104,000 annually.
For employers who choose to participate, the notice requires that the deferred taxes be withheld and paid from wages and compensation paid to employees during the period between January 1, 2021, and April 30, 2021, and interest and penalties will begin to accrue on any unpaid taxes starting May 1, 2021. The notice also provides that, if necessary, employers can “make arrangements to otherwise collect the total Applicable Taxes from the employee”. This may be the case, for example, in the event an employee terminates employment or is furloughed prior to the deferred taxes being withheld and paid.
For employers seeking to implement this deferral of employee payroll taxes or for additional details, we recommend contacting your payroll service provider for assistance. We will continue to monitor changes and provide updates as any additional guidance becomes available. Please check our dedicated COVID-19 page for updated FAQs and articles, and as always, please reach out to the ML&R team with any questions.