What Do You Need to Know About Payroll Tax Deferral?

Although much attention has been given to President Trump’s August 8, 2020 executive order on supplemental unemployment compensation benefits, employers must also be aware of another presidential action taken that same day. In particular, President Trump signed an executive order that would defer the withholding, deposit, and payment of the employee portion of federal payroll taxes (i.e., Medicare and Social Security) for individuals generally earning less than $4,000.00 on a biweekly basis from September 1, 2020 through the end of the year. The executive order also directs the Treasury Department to issue guidance implementing the deferral and “explore avenues, including legislation,” to forgive the obligation to pay the deferred taxes.

Unfortunately for employers, this executive order also leads to more questions than answers. For example, commentators have disagreed over whether the payroll tax deferral is voluntary or mandatory based upon the text of the executive order. It is also unclear when the Treasury Department will issue guidance on this matter. In addition, given that Congress is currently on a recess, it is unlikely that any legislation on the forgiveness of deferred payroll taxes (or any other potential stimulus measures) will pass any time soon.

For the time being, employers will need to wait for guidance from the Treasury Department and/or legislation from Congress for more clarity on these issues. We will be sure to keep you updated on the latest developments on this front. For questions about this or any other labor and employment issues, please do not hesitate to contact the attorneys at Hoffman & Hlavac.  To stay updated on this and the other key labor and employment law developments that affect your workplace, subscribe to our blog and follow us on social media.