Client Alerts What Does the Executive Action Deferring Payroll Taxes Mean for Employers and Employees?

Publication
08.12.20 | By: Robert Swenson

On August 8, 2020, President Trump signed an executive memorandum that defers an employee’s portion of Social Security and Medicare taxes from September 1 through December 31, 2020. At this point, the taxes are just deferred, meaning they will still have to be paid at a later date.

read more

On August 8, 2020, President Trump signed an executive memorandum that defers an employee’s portion of Social Security and Medicare taxes from September 1 through December 31, 2020. At this point, the taxes are just deferred, meaning they will still have to be paid at a later date. However, the action directs U.S. Treasury Secretary Steven Mnuchin to “explore avenues, including legislation, to eliminate the obligation to pay the taxes.”

The exact impact on employers and employees is not yet known. There are many open questions, including President Trump’s legal ability to implement the deferral. Some experts believe there may be legal challenges to this executive action.

Deferral details

The payroll tax deferral will be available for “any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000.”

The deferral will be calculated on a pretax basis or the equivalent amount with respect to other pay periods. Plus, the amounts will be deferred without any penalties, interest, additional amount or addition to the tax.

Stay tuned for additional guidance

No doubt there is much to flesh out about this payroll tax deferral. Secretary Mnuchin has been instructed to provide additional guidance and employers cannot act on the deferral until that happens. It is also possible Congress could take action. We will be monitoring developments and their implications, so turn to your ORBA advisor for the latest information.

If you have questions please contact Rob Swenson at [email protected] or 312.670.7444.

News & Events

view all

Forward ThinkingClient Alerts

view all

seminars & events

Guides

ORBA will gladly provide you with hard copies of the useful guides listed below. Select which guides you would like to receive and submit the form below.

  • Tax Pocket Guide
  • Tax Planning Guide
  • Records Retention Schedule
  • Auto, Travel & Business Log

request guide

Close
Forward Thinking
Forward Thinking