Aug 31 Guidance Released on Social Security Withholding Deferral
On August 8, 2020, the President issued a Presidential Memorandum directing the Secretary of the Treasury to defer the withholding, deposits and payment of certain payroll tax obligations. On Friday, August 28, 2020, the IRS released Notice 2020-65 as further guidance.
The guidance sets forth the deferral rules, deposit obligations, applicable wages, repayment obligations, and determination of the Affected Taxpayers.
Since the employer is required to withhold and pay the employee share of the social security tax, they are deemed to be the Affected Taxpayer. The deferral rules allow for the employee’s social security tax on applicable wages to not be deducted from September 1, 2020 through December 31, 2020. These deferred deductions must be repaid ratably between January 1, 2021 and April 30, 2021.
The applicable wages are social security wages paid beginning September 1, 2020 through December 31, 2020. They must be less than the threshold amount of $4,000 per bi-weekly period. This determination is made on a pay period-by-pay period basis.
We will keep you informed of additional guidance as it is released. In the interim, please reach out to your Sax advisor with any questions.