Notice to Employees of Temporary Social Security Tax Deferral
Client AlertWritten 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.
This tax deferral is available to employees whose wages are less than $4,000 biweekly.
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.
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 firstname.lastname@example.org
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