Presidential Executive Order Payroll Tax Impact
August 11, 2020 – On August 8, 2020, President Trump issued an executive order that allows employees to defer payroll taxes in light of the ongoing COVID-19 pandemic.
The executive order directs the Secretary of the Treasury, Steve Mnuchin, to defer the withholding, deposit, and payment of certain taxes on wages or compensation paid during the period of September 1, 2020 through December 31, 2020. The order also directs the Secretary to provide guidance necessary to implement the order and to explore legislation and other avenues to eliminate or forgive the deferred amounts.
What taxes are being deferred?
Taxes that are eligible for deferral are the employee portion of the Social Security tax imposed by Code Sec. 3101(a) (the 6.2% employee tax that provides for old-age, survivors and disability insurance under the social security tax) on wages or compensation.
Who qualifies for the deferral?
The deferral shall be made available to any employee the amount of whose wages or compensation payable during any bi-weekly pay period is less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.
Additional guidance is expected for employers on how to implement this change. As additional guidance is issued we will provide updates but if you have any questions regarding how this executive order may impact you or your business you can contact your tax planning advisor.