Insight

What does the executive action deferring payroll taxes mean for employers and employees?

What does the executive action deferring payroll taxes mean for employers and employees? | payroll accounting | WCS | Baltimore, Maryland

On August 8, 2020, President Trump signed an executive memorandum that defers an employee’s portion of Social Security and Medicare taxes from September 1 through December 31, 2020. At this point, the taxes are just deferred, meaning they’ll still have to be paid at a later date. However, the action directs U.S. Treasury Secretary Steven Mnuchin to “explore avenues, including legislation, to eliminate the obligation to pay the taxes.”

The exact impact on employers and employees isn’t yet known. There are many open questions, including President Trump’s legal ability to implement the deferral. Some experts believe there may be legal challenges to this executive action.

Deferral details

The payroll tax deferral will be available for “any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000.”

The deferral will be calculated on a pretax basis or the equivalent amount with respect to other pay periods. Plus, the amounts will be deferred without any penalties, interest, additional amount or addition to the tax.

Stay tuned for additional guidance

No doubt there is much to flesh out about this payroll tax deferral. Secretary Mnuchin has been instructed to provide additional guidance and employers can’t act on the deferral until that happens. It’s also possible Congress could take action. We’ll be monitoring developments and their implications, so turn to us for the latest information.

© 2020

Related Insights

Tax-favored Qualified Small Business Corporation status could help you thrive | accountant in elkton md | Weyrich, Cronin, and Sorra

Management Advisory Services & Business Consulting

Tax-favored Qualified Small Business Corporation status could help you thrive

Operating your small business as a Qualified Small Business Corporation (QSBC) could be a tax-wise idea. Tax-free treatment for eligible stock…
Should your business offer the new emergency savings accounts to employees? | tax accountant in washington dc | Weyrich, Cronin & Sorra

Management Advisory Services & Business Consulting

Should your business offer the new emergency savings accounts to employees?

As part of the SECURE 2.0 law, there’s a new benefit option for employees facing emergencies. It’s called a pension-linked emergency savings…
Update on IRS efforts to combat questionable Employee Retention Tax Credit claims | business consulting services in washington dc | Weyrich, Cronin & Sorra

Management Advisory Services & Business Consulting

Update on IRS efforts to combat questionable Employee Retention Tax Credit claims

The Employee Retention Tax Credit (ERTC) was introduced back when COVID-19 temporarily closed many businesses. The credit provided cash that…

Connect with us

Use the form below to send us an email. WCS responds directly to all inquiries and general questions within 24 hours of posting.

This contact form is deactivated because you refused to accept Google reCaptcha service which is necessary to validate any messages sent by the form.