Treasury Department Provides Guidance on President Trump’s Deferral of Payroll Taxes

By Eric Hemmendinger - Shawe Rosenthal LLP

September 2, 2020

The U.S. Department of the Treasury issued, on August 28, 2020, a Notice concerning President Trump’s Presidential Memorandum concerning employers’ deferral of payroll taxes.  Here are the key points:

•    The Presidential Memorandum permits employers to defer the withholding and payment of FICA taxes, which consist of the 6.2 percent social security tax and the 1.45 percent Medicare tax.
•    The deferral is available only to employees making less than $4,000 per bi-weekly pay period.
•    The deferral is available only during the period September 1 to December 31, 2020.
•    The Notice is not entirely clear, but we read it as making the deferral optional. (The Notice defers the deadline for collecting and withholding taxes—it does not forbid employers from collecting and filing before the deadline.)  The choice is up to the employer—employees do not get to decide.
•    The employer must pay the deferred payroll taxes between January 1 and April 30, 2021, or interest and penalties will be applied.
•    The obligation to pay the deferred taxes is on the employer, not the employee. To recover the cost, employers can impose an additional withholding on employees next year, subject to state laws concerning deductions from wages.  The Notice does not say what happens if employees are terminated or laid off before the employer has deducted enough to satisfy the deferred tax liability allocable to that employee.