On August 8, 2020, President Trump issued an Executive Order to defer the withholding, deposit, and payment of employee social security tax obligations beginning September 1, 2020 through December 31, 2020. On August 28, 2020, the Internal Revenue Service (IRS) and Secretary of the Treasury issued guidance (Notice 2020-65) detailing the implementation of the Executive Order. Employers, otherwise required to withhold and pay the employee share of social security tax, may defer the withholding related to applicable wages until January 1, 2021 through April 30, 2021. Applicable wages are defined as (1) compensation paid to employees receiving less than $4,000 on a bi-weekly basis and (2) compensation paid September 1, 2020 through December 31, 2020.
The guidance allows for the deferral of employee social security tax withholdings. Given deposit obligations arise when the tax is withheld, this, too, allows for the deferral of the deposits. The notice does not separately allow for the deferral of the deposits. Thus, if an employer continues withholding the employee portion of social security tax during the deferral period, the tax deposits are due as normal.
Under current guidance, the Executive Order allows for a tax deferral, not tax forgiveness. Employers are ultimately responsible for remitting the tax January 1, 2021 through April 30, 2021. Therefore, if an employee leaves his or her job prior to May 1, 2021, and there are uncollected social security taxes owed, the employer may plan to otherwise collect the total taxes owed from the employee.
The current guidance is limited and does not provide definitive language as to whether the deferral is optional or mandatory. However, the guidance relies on section 7508A of the Internal Revenue Code, which allows the IRS to postpone deadlines for various acts but does not explicitly prohibit the timely withholding and payment of taxes.
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