As you may know, President Trump released a Presidential Memorandum on August 8th that was referred to as a payroll tax holiday. Up until this past Friday, August 28th, there was little guidance issued, and many employers and employees were unsure of what this payroll tax holiday would entail. On Friday, August 28th, the Treasury released further guidance, and we wanted to pass along the information to our clients who may also be employers.
Treasury Guidelines Put Employers in the Drivers Seat for Trump’s Payroll Tax Break
The initiative postpones the due date for payroll taxes that are normally withheld from employee’s payroll checks. The plan only applies to workers with annual salaries of less than $104,000, and employers are asked to stop withholding the 6.2% payroll tax that represents an employee’s share of Social Security taxes.
The employees, however, would still be responsible for the taxes, just not until after the end of the year. It is still not clear how the mechanics of this would work, especially if an employee were to leave the job where the employer had suspended the withholding. We are under the impression, after the guidance, that the first quarter of 2021 will require the employer to “double-withhold” these taxes to make up for the shortfall of the 2020 fourth quarter.
Course of Action is Up to the Employer
Treasury Secretary Steve Mnuchin has said that “you cannot force people to participate” which leads us to believe (along with the Treasury Guidance issued) that this is completely up to the employer, and not the employee. It also looks like the “catch-up” in the first quarter of 2021 will be up to the employer, and the burden of repayment would ultimately fall to the employer as well.
With that in mind, most of the guidance we are seeing is for employers to continue withholding and remitting tax payments as they have in the past.
Please reach out to any of our staff with questions or assistance.