Allevity Blog

Payroll Tax, Lost Wages, and What the President’s Order Means For You

Aug 11, 2020

Last weekend, the President issued memoranda concerning, among other topics, employee and employer payroll tax and benefits for lost wages. We realize this news may be confusing, so we wanted to provide a quick resource for business owners to know what they should do in response to these.

PAYROLL TAX

What It Is: This 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.

What It’s Not: The memorandum does not indicate that any deferred tax payments will be forgiven, so at this point in time, it’s not a reprieve but merely a delay up to one year (at the discretion of the Secretary of the Treasury). No penalties or interest are charged upon repayment within that time.

It does not apply to:

  • The employer’s 6.2 percent Social Security tax,
  • The 1.45-percent Medicare insurance tax, or
  • parallel taxes on self-employment income.

Who’s Eligible? The memorandum applies only to employees earning less than $4,000 bi-weekly (or $104,000 annually), pre-tax.

What Should You Do? At this point, pending treasury guidance, we recommend that employers continue to withhold amounts equal to deferred taxes. The employer may be liable for payment of delayed taxes if they are not forgiven, and not paid by the employee.

SUPPLEMENTAL UNEMPLOYMENT BENEFITS FOR LOST WAGES

What it is: A new order to resume federal disaster support for unemployment benefits, which had previously distributed $600 weekly to those who had lost work due to COVID-19. The new memorandum authorizes a fed-and-state-funded $400 total per person per week, to unemployment claimants as of August 1.

Who’s Eligible? A claimant may seek aid if they have lost at least $100 per week due to reduced hours or job loss because of the pandemic and can provide documentation of their hardship.

Other eligible claimants include those who:

  • receive Short-Time Compensation
  • receive Trade Readjustment Allowance
  • receive payments under the Self-Employment Assistant program

What Should You Do? If you must adjust your workforce or hours, it is key that you provide ample documentation of any hour reductions, furloughs, or terminations. This continues to be of utmost importance for both employers and their employees.

THE EXECUTIVE ORDER: EVICTION SUSPENSION

The EO addresses evictions amid the growing COVID-19 crisis in the United States. Though not directly relevant to HR or payroll operations, many may wish to see the details of that order as it could potentially affect their employees. Read the White House’s Executive Order here.

Allevity is Here to Help!

Until the treasury provides more guidance, the recommendation for employers at this point is to stay the course, specifically when it comes to payroll tax.

If you find you’re still mystified by all the memorandum language, give us a call and we’ll talk it out!

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