Payroll Tax Deferral

On August 29, the U.S. Department of the Treasury released Notice 2020-65 in response to President Trump’s executive order allowing employers to defer the employee share of Social Security tax (6.2%) withheld from September 1 through December 31, 2010.  Payment of those deferred taxes would be paid by the employer ratably, through paycheck withholdings, during pay periods from January 1, 2021 and April 30, 2021.  Thus, a 0% Social Security tax will be imposed on employees from September 1 through December 31, and 12.4% tax from January 1 – April 30. 

The payroll tax deferral is available on employees who make less than $4,000 in a bi-weekly paycheck.   The deferral is only applicable to the 6.2% Social Security tax and not the Medicare tax or employer portion of Social Security tax.

The Notice fails to address several topics including the rules for when employees terminate employment and if the deferral is mandatory for employers.

Below for your information are links to President Trump’s executive order and the IRS’s rules related to repayment of the deferred taxes.