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  • 09/10/2020

    Notice to Employees of Temporary Social Security Tax Deferral

    Client Alert

    Written by: Susan L. Swatski, Esq.

    On Aug. 28, 2020, the IRS issued Notice 2020-65, allowing employers to temporarily defer withholding the employee’s portion of Social Security payroll taxes as directed by an Executive Order issued by President Donald Trump. This tax deferral allows employees to see an increase in take-home pay for the remainder of 2020, essentially providing employees with a short-term loan that is expected to be repaid in 2021. Employer participation in the program is optional. If your business is planning to participate, the following FAQs are provided to help employees understand what this means for their paycheck.

    Eligibility

    This tax deferral is available to employees whose wages are less than $4,000 biweekly.

    Start Date

    Social Security tax withholding is deferred for pay periods starting Sept. 1 through Dec. 31, 2020.  Social Security taxes are 6.2 percent of each employee’s pay.

    Repayment?

    Unless Congress passes additional legislation forgiving the repayment of this tax deferral, employees will repay the taxes by doubling the employee's Social Security tax paycheck withholding to 12.4 percent during the first four months of 2021.

    If employment is terminated prior to repayment of the deferred Social Security taxes

    Employees who separate employment will be required to pay their former employer the amount of any outstanding deferred Social Security taxes either through a deduction from the final pay check or through a personal check or money order.  The employer remains responsible to directly repay the deferred taxes.

    Guidance on this tax deferral is evolving. Please contact me if you need assistance at sswatski@hillwallack.com

    ©2020 Hill Wallack LLP. All rights reserved. Please contact Hill Wallack for permission to reprint. Notice: The purpose of this Client Alert is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, accuracy and completeness of which cannot be assured. This Client Alert should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.