The IRS issued Notice 2020-65 last Friday. This notice contains the first details of the optional payroll tax deferral program that starts September 1 and lasts through the end of the year. The notice provides that employers are not required to withhold the employee’s share of Social Security tax for any biweekly payroll that is less than $4,000 (or equivalent for alternate pay periods). The taxes deferred in this manner would be withheld from the employee beginning in January 2021 through April 30, 2021.
Although there is some talk about this deferral being converted to a waiver of these deferred FICA taxes, there is NO AUTHORITATIVE guidance from the President, Congress, or the IRS to rely on. Participating employees/employers should assume the deferred taxes will be repaid through FICA withholding in 2021.
Also, this applies only to FICA withholding. Federal income tax and Medicare withholding rules for all employees are unchanged.
If your company has employees who would qualify, and you believe you should participate in the deferral provision, we suggest that you contact us to discuss the impact and implementation issues.
Update: This post was updated 9/4/20 to add confirmation that participation in the deferral program is optional.