High Quality Payroll and HR Services

Sep 03, 2020

Initial Guidance: Employee Tax Deferral Executive Order

New language from the White House offers a temporary payroll tax deferral - should you take advantage of it?

 

Following recent developments from the White House, we want to provide you with the latest information we have available regarding the Employee Social Security Tax Deferral.

On August 28, the Treasury released guidance in response to the President’s Executive Order allowing employees to defer their 6.2% portion of social security tax (i.e., FICA) or railroad retirement tax. This deferral does not apply to Medicare or federal income tax withholding. This is a deferral, not forgiveness.

In Notice 2020-65, the Treasury places the responsibility on employers to delay this withholding on all “applicable wages.” It also requires employers to ensure the repayment of the deferred payroll tax.  

Applicable Wages

Applicable wages are employee wages or compensation paid beginning on September 1, 2020 and ending on December 31, 2020 that amount to less than $4,000 on a bi-weekly pay period or the equivalent in other pay periods. If an employee’s pay is greater than this amount, they are not eligible for the deferral.

This determination will be made on a period-by-period basis. Wages under the threshold in one pay period are eligible for deferral, even if wages are above the threshold (and therefore ineligible) in a different pay period.

Employer Obligation

The due date for an employer to withhold the applicable taxes is postponed to the period between January 1, 2021 and April 30, 2021. Employers have the option to “make arrangements to otherwise collect” the deferred tax from employees (e.g., those who leave the company), but the payment of the deferred tax is ultimately the obligation of the employer. If those deferred payroll taxes from 2020 are not remitted by April 30, 2021 interest and penalties will begin to accrue on May 1, 2021.

Observations from various accountants:

Can employers give employees the option of whether the employee wants to defer their payroll tax? Treasury Secretary Mnuchin has made statements indicating the deferral may be optional. In other words, employers may be able to decide whether they offer this to employees or not. In addition to the burden placed on employers to delay the withholding and ensure the taxes are repaid, employees would also face a potential hardship of double withholding of the 6.2% tax for the first four months of 2021. Employees still owe the taxes eventually. Any increase in take-home pay from September 1, 2020 – December 31, 2020, (by not withholding social security tax) will result in a reduction in take-home pay from January 1, 2021 – April 30, 2021, (by having to catch-up on that deferred social security tax).

The employer is ultimately responsible for the repayment of those taxes. Earlier speculation was that employees would pay any deferred payroll tax as part of their annual Form 1040 Individual Income Tax Return. However, this notice does not offer that as an option – instead, it’s up to employers to figure out how to collect and remit any deferred payroll taxes. It provides rather vague instructions on how exactly employers should do this. If the employer cannot withhold the required deferred payroll tax in that January 1, 2021 – April 30, 2021, time frame, then the notice advises employers to make arrangements to collect the taxes from the employee. Former employees are less likely to willingly make arrangements with their former boss to pay in their deferred tax. If the employer isn’t able to collect it from the employee, the company itself could be on the hook to pay the payroll tax by April 30, 2021, to avoid penalties and interest.

If you are curious as to whether this tax deferral is the best decision for your unique situation, your accountant should be able to advise on the correct path to take.


 

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Aug 28, 2020

Back-To-School FFCRA Guidance

The "when," "where," and "how" on returning to school aren't set in stone just yet - here are a few answers to questions you may have in the meantime.


Aug 17, 2020

At-Will Employment: What Does it Mean?

You've heard the term - let's dig a little deeper!


Jul 23, 2020

Potential New FFCRA Rules from the Department of Labor

The guidelines surrounding employee leave due to COVID-19 are still evolving - stay on top of it all!


Jul 10, 2020

Q&A: COVID-19 Employer Guidelines

Managing employees is different than ever before - what should you be prepared for?


Jun 26, 2020

Employer on the GO Tutorial: Payroll Journal Access & Summary

A walkthrough detailing the contents of your payroll journal in Employer on the GO!


Jun 25, 2020

Employer on the GO Tutorial: Approve Payroll & Notify Provider

A walkthrough showing how to finalize your payroll and inform your provider with Employer on the GO!


Jun 24, 2020

Employer on the GO Tutorial: Preview & Process Payroll

A walkthrough showing how to preview your payroll before processing using Employer on the GO!


May 26, 2020

Employer on the GO Tutorial: Enter Payroll Hours using the Enhanced Pay Grid

A walkthrough showing how to enter payroll hours using the Enhanced Pay Grid from Employer on the GO!


May 19, 2020

Employer on the GO Tutorial: Navigate Enter Payroll Setup Menu

A walkthrough showing how to edit and understand the Enter Payroll Setup menu with Employer on the GO!


May 07, 2020

Should You Rethink Paid Leave?

Don't demonize paid time off - celebrate it!


Apr 28, 2020

Employer on the GO Tutorial: Access and Manipulate Payroll Detail Reports

A walkthrough to access and customize your payroll detail reports as an Employer on the Go user.


Apr 27, 2020

IRS Unveils 'Get My Payment' Feature

Curious about your eligibility for COVID-19 stimulus payments? Check out this new tool from the IRS!


Apr 24, 2020

Employer on the GO Tutorial: Payroll Document Access and Details

A walkthrough to access and understand your payroll documents package as an Employer on the Go user.


Apr 22, 2020

9 Advantages Of Automated Time Tracking

Take advantage of automated time tracking to optimize your workforce.


Apr 15, 2020

The Importance of Time-Off Management

Paid time off can be a great tool to improve employee morale and productivity.


Apr 13, 2020

Employer on the Go Tutorial: Quarterly Report Access/CARES Act Report

A walkthrough to access quarterly reports packages as an Employer on the Go user.


Apr 09, 2020

TimeWorksPlus Has Geofencing!

If you need to know whether or not your employees are working in the correct location, you need Geofencing.


Apr 07, 2020

Scam Warning: Fraudsters Using New Tactics to Steal Personal Data During COVID-19 Pandemic

Unfortunately, even in times of crisis, there are those who seek to benefit at the expense of others.


Mar 20, 2020

Why Is Taxation Related To Cannabis Businesses So Complicated?

Beware: 2020 Could Be A Banner Year For IRS Audits Of Cannabis Businesses


Feb 23, 2020

3 of 4 Business are Underinsured – Is Yours Protected?

Insurance often feels like an unnecessary cost - until you need it.


Dec 31, 2019

Six Payroll Problems To Keep In Mind

Getting a grip on your payroll can ease the burden on cash flow and help your company remain afloat.


Dec 30, 2019

Solutions To 7 Frustrating Employee Scheduling Problems

Employee scheduling doesn’t have to be a dreaded chore. TimeSimplicity is your solution.




More News & Press can be found in our Archive.


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610-310-7615


Payroll solutions and HR support for the cannabis and medical marijuana industry