On August 28, 2020 the Department of Treasury and Internal Revenue Service issued guidance implementing the Presidential Memorandum issued on August 8, 2020. This allowed employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below a certain amount.
This deferral generally applies to wages paid starting September 1, 2020, through December 31, 2020.
The holiday applies to the Employee’s share of the Social Security tax, but only if the wages paid to a worker in a bi-weekly pay period falls below $4,000, and each pay period is considered separately.
But be aware, this is a deferral of taxes only – not a forgiveness.
Employers that choose to defer the taxes, must withhold and pay those deferred taxes ratably from the Employees pay between January 1, 2021 and April 30, 2021.
The deferral is optional, to be chosen by the Employer.
Because there are no penalties for companies that do not participate in the tax holiday, it is optional to implement this for your Employees.
If you choose to implement this deferral, there are potential risks you could face.
If you are weighing your options as an Employer and have additional questions, we are here to help.