The IRS and Treasury issued initial guidance Notice 2020-25 implementing President Trump’s executive order to defer the 6.2% tax employees pay toward social security from September 1, 2020 through December 31, 2020.
The IRS guidance places the responsibility on employers for collecting the tax deferred and it must be paid by April 30, 2021 without penalties, interests and other taxes. The Notice provides that the employer can make arrangements to otherwise collect the total applicable taxes from the employee. Additional guidance has said this deferral is voluntary for the employer.
The deferral may apply to any employee whose wages or compensation, payable during any biweekly pay period, generally is less than $4,000 (calculated on a pretax basis).
This means for employees who participate in the payroll tax deferral will see a temporary increase in their take-home pay for the rest of 2020. However, this in turn means, the employee will see a decreased amount of their paychecks at the beginning of 2021.
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