Federal Tax Update: Employee Payroll Tax Deferral

Federal Tax Update: Employee Payroll Tax Deferral

In an Executive Order signed on August 8, 2020, President Donald Trump directed Treasury Secretary Steven Mnuchin to defer withholding, deposit, and payment of the 6.2% employee tax on wages and compensation for the period of September 1, 2020 - December 31, 2020. 

The deferral is available with respect to any employee, the amount of whose wages or compensation payable during any biweekly pay period generally less than $4,000, calculated on a pretax basis, or the equivalent amount with respect to other pay periods. The amounts will be deferred without any penalties, interest, additional amount, or addition to the tax. 

The order directs Mnuchin to provide guidance to implement the order. It also directs Mnuchin to explore potential avenues, including legislation, to eliminate the obligation to pay the deferred taxes. 

At this time, there exists no definitive provision as to when such deferred tax may need to be paid. Employees who have such tax deferred, for the immediate future, should consider the impact of eventually paying the tax in the event that the obligation is not eliminated. Further guidance on these questions is expected in the coming weeks. 

Please note that this summary is for your general information and is not legal or tax advice. If you have any questions or if you would like specific guidance as to how we may be able to assist you in your particular situation, please contact us.

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