Payroll Tax Guidance is Here. Should You Defer?
There is finally guidance from the U.S. Treasury about the employee and employer payroll tax order issued earlier in August.
Here are the details:
What It Is: The order directs the Treasury to provide employees an opportunity to defer payment on the standard 6.2-percent Social Security tax and applies to the period from September 1 through December 31, 2020.
What It’s Not: It is not a reprieve, but merely a delay on making tax payments until April 30, 2021. No penalties or interest are charged upon repayment within that time, but it will not be forgiven, only deferred, and the entire amount will be due.
What You Should Do: Because this is only a short-term deferral and not forgiveness, and because the employer is ultimately liable for paying the employee's deferred taxes, our advice is to use caution before offering deferment to employees. Those taxes will become due in 2021, and if your employee doesn't pay them, you are liable.
The full guidance, should you wish to see the Treasury document, is available here.