Payroll Tax Deferral

The payroll tax deferral generally applies to employees earning less than $4,000 before taxes, per bi-weekly pay period. The tax payments are deferred without any penalties, interest, additional amount, or addition to the tax.

The Treasury Department recently issued guidance (the “Notice”) on the Memorandum, clarifying that the Memorandum calls for a deferral, not forgiveness, of the employees’ portion of the Social Security tax. The Notice allows – but does not require – employers to defer payroll taxes from September 1, 2020 through December 31, 2020. Following this period, employers who opt to withhold payroll taxes are responsible for remitting the deferred taxes between January 1, 2021 and April 30, 2021.

According to the Notice, employers are liable for taxes not repaid in full by April 30, 2021. However, employers may make “alternative arrangements” to collect the taxes from employees if necessary.

Employer Considerations

• The Notice leaves open the question of whether individual employees may opt out of their employer’s decision to defer payroll taxes.
• The Notice provides limited procedural guidance for employers seeking to collect deferred payroll tax amounts from former employees, stating that “if necessary, the Affected Taxpayer may make arrangements to otherwise collect the total Applicable Taxes from the employee.”
• To avoid potential liability, employers should make arrangements with employees to ensure repayment before choosing deferral.

Please contact a Kerr Russell attorney today for more information on the Payroll Tax Deferral.

John D. Gatti is a Certified Public Accountant as well as an attorney. He concentrates his practice in the areas of taxation, mergers and acquisitions, business law, real estate law, and estate planning. John also serves as the firm’s administrative partner and chairs the firm’s Taxation Practice Group. He has considerable experience representing professional services firms. These include accounting, engineering, and architectural firms, as well as insurance agencies, in purchase and sale transactions.

Mark C. Knoth chairs the firm’s Labor, Employment, Employee Benefits & ERISA Practice Group. He counsels and advises business owners, managers and human resources professionals on workplace issues. These include civil rights and anti-discrimination laws; employee discipline; wage and hour; overtime; employee leaves; reasonable accommodations; veterans issues; picketing; secondary boycotts; reductions in force; drug testing; unemployment compensation; affirmative action; and union organizing campaigns, among other matters. He additionally drafts employee policies, handbooks, contracts, and covenants not to compete, and investigates threats of violence, allegations of harassment, and other employee misconduct.

Cody Attisha focuses on taxation law, corporate law, mergers and acquisitions, finance, and estate and trust planning. He also helps clients with entity formation, including evaluating, choosing, and implementing the right partnership, corporate, or non-profit structure.

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