On Friday, August 28th, the IRS issued Notice 2020-65 to provide details for implementation of the Presidential Memorandum issued by President Trump on August 8th that provided a deferral of certain payroll taxes for employees.
What we know now:
- The employee’s share of Social Security tax withholding (6.2%) is deferred for applicable wages paid to an employee on a pay date between September 1, 2020 and December 31, 2020.
- Applicable wages are defined as those that are less than the following limits on a pay period-by-pay period basis:
- The employer is required to withhold and pay the deferred Social Security tax ratably from wages paid between January 1, 2021 and April 30, 2021.
What is still unknown:
- Can the employer opt out of offering the deferral to its employees or is it required? UPDATE 9/3/2020: According to correspondence from the IRS Hotline for Notice 2020-65, the relief provided is optional for employers to offer to its employees.
- Must employees be required to make an election to defer the payroll tax or is it automatic?
There is speculation that IRS may issue instructions for a draft 941 form that was released on Friday that may clear up the remaining unknowns. We will keep you informed as additional guidance is provided, and will likely update this blog post.
Please reach out to your JMF accountant with questions.