#Payroll tax deferral guidance how to

Note: this means it’s possible employees could be above the $4,000 threshold for one pay period and, therefore, not eligible for this payroll tax deferral while remaining eligible in other pay periods when their taxable wages are less than $4,000. No deferral is available to an employee with taxable wages of $4,000 or more for a biweekly pay period. The applicable wages are taxable wages to an employee that are less than $4,000 during a biweekly pay period, with each pay period considered separately. Therefore, it appears employers have discretion (even on an employee-by-employee basis) on whether to stop withholding starting September 1, 2020. This also is consistent with comments made by Treasury Secretary Steven Mnuchin shortly after the executive memorandum was released, in which he stated the payroll tax deferral is voluntary.

While it doesn’t specifically state the deferral is optional, the notice’s wording that the due date for withholding and payment of tax is postponed indicates employers have flexibility. Any employer required to withhold and pay the employee share of Social Security tax (or railroad retirement tax equivalent) is deemed to be affected by the COVID-19 pandemic and may take advantage of this payroll tax deferral executive order.

#Payroll tax deferral guidance how to

On August 28, the Treasury and IRS issued Notice 2020-65 with further guidance to employers on how to implement this payroll tax deferral. For further background on this payroll deferral executive order, see our previous BKD Thoughtware ® coverage.

Department of the Treasury (Treasury) to defer certain payroll tax obligations amid the ongoing COVID-19 pandemic. Trump signed an executive memorandum directing the U.S.