UPDATE: Treasury Department and IRS Issue Guidance on Deferring Certain Employee Social Security Tax Withholding

September 17, 2020

The Department of the Treasury and the IRS recently issued guidance implementing the Presidential Memorandum issued on Aug. 8, 2020, allowing employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below a certain amount.

Notice 2020-65 makes relief available for employers and generally applies to wages paid starting Sept. 1, 2020, through Dec. 31, 2020. The notice provides the option for employers to defer the withholding, deposit and payment of the employee portion of the OASDI (Old Age, Survivors and Disability) of FICA taxes – the 6.2 percent tax on employment wages. The deferral is not mandatory and there is no penalty to employers for not participating.

The deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a biweekly pay period, with each pay period considered separately. No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a biweekly pay period. Employees with variable pay could be eligible for deferral in one payroll period but not eligible in the next period.

One area not addressed by the notice is how the deferred taxes will be collected if an employee leaves their employer before the deferred amount is paid.

TSCPA will continue to provide updates to this story. To read the full Notice 2020-65, visit the IRS website.