Executive Order to Defer Payroll Taxes
Executive Order to Defer Payroll Taxes:
The IRS issued guidance on Friday, August 28 2020, regarding the payroll tax deferral ordered by President Trump earlier in the month. Additional guidance is still needed and is likely forthcoming, but here is where we stand today:
- This allows, but does not require, employers to defer the employee portion of Social Security taxes on wages paid from Sept. 1-Dec 31, 2020.
- Employers would be required to collect from the employees and remit the deferred taxes between Jan 1-April 30, 2021. Interest and penalties on unpaid taxes will accrue effective May 1, 2021.
- This deferral applies to any employee whose pretax wages during any biweekly period are less than $4,000.
- If the employer is unable to collect the deferred Social Security taxes by April 30, 2021, they will be responsible for payment under the current executive order.
It should be noted that this will likely result in deferral through December 31st, but require double withholding from employees From Jan 1- April 30, 2021. While this may provide relief to employees immediately, it will create hardship for employees in the new year. As such, BSK Financial Services, Inc. is recommending opting out of this tax deferral to avoid burdening employees or companies with large tax bills next year. We will continue to update our clients as additional guidance is provided, if any.