Update: employee payroll tax deferral

During a payroll tax industry telephone conference on September 3rd, the Internal Revenue Service commented on many issues related to President Trump’s Executive Order which permitted the postponement of withholding, deposit, and payment of the employee’s share of Social Security Tax for wages paid September 1, 2020, through December 31, 2020, as well as Notice 2020-65. (see our previously issued Mazars Tax Alert “IRS Provides Guidance on Executive Order Deferring Payroll Tax Obligations”).

The IRS stated the following key takeaways:

  • The postponement of the tax is optional for the employer. Furthermore, Notice 2020-65 does not address how employers are to implement the deferral, so employers are permitted to ask employees for input regarding the postponement and to allow employees to opt-in or -out of the deferral if the employer elects to take the postponement.
  • The applicable wages are determined on a pay period basis and the year-to-date wages would not be considered. Bonus payments should be reviewed to determine if the payment is part of a pay period or its own pay period.
  • The employer remains liable for the employee’s share of Social Security tax and must remit all taxes by April 30, 2021, to avoid penalties, interests, and additions. The IRS expects to issue an updated final version of Form 941 to track the postponement as well as guidance on W-2 reporting requirements.
  • The agency could not comment on the impact of potential future legislation that would forgive the deferred amount.

Please contact your Mazars USA LLP professional for additional information.

Published on September 4, 2020