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By Joseph A. Mastriani, CPA/PFS, CFP, Shareholder | Buckno, Lisicky & Company

calculator spreadsheet and pen

I want to make you aware of the most recent guidance from the U.S. Treasury and the IRS regarding the August 8 presidential executive order allowing for the deferral of the employee portion of Social Security taxes. 

This order, signed by the President, can only suspend the payment of social security taxes, not forgive or eliminate them entirely.  It would require an act of Congress to permanently forgive the taxes deferred. Below is a summary of the main provisions of the payroll tax deferral:

Many unanswered questions remain, including whether employees can opt out of the deferral of taxes withheld and what would apply if the employee left employment prematurely or did not make enough money to pay the taxes back in 2021.  Again, the employer is ultimately responsible for the payment of any taxes not recovered from the employee.  Moreover, business owners can be held personally responsible for failure to remit any required payroll tax withholdings.

  *   Suspension or deferral of employee portion of Social Security Taxes (6.2%)
  *   Available for employees making less than $4,000 bi-weekly for payment of wages from September 1 – December 31, 2020
  *   To be repaid from January 1 – April 30, 2021 through employee withholding (in addition to regular Social Security tax withholding)
  *   Employer would basically double withhold the 6.2% of employees portion of Social Security taxes during this time frame
  *   Employers can choose to offer deferral or not to employees
  *   Employer is ultimately responsible for payment of the deferred amounts
  *   If payments are not made by April 30, 2021, the employer will be subject to interest and penalties on the unpaid balance

Ultimately, if a decision is made to elect to defer the Social Security tax from employees’ pays, employees should be encouraged to consider saving the additional paycheck increase if it is determined that these taxes must eventually be repaid after the start of next year.

Please feel free to contact our office, Buckno, Lisicky & Company, at 610-377-6960 or email me at jmastriani@blco-cpa.com should you have any questions regarding the above guidance.