Guidance Clarifies Payroll Tax Deferral Executive Memorandum

On Friday, August 28, the Department of the Treasury announced the publication of IRS Notice 20-65 with guidance on how the President’s payroll tax deferral will work.  However, the IRS guidance was light on details and left many questions unanswered.

The U.S. House Ways & Means Committee has therefore stepped up to offer some additional details.  Here are some primary points not covered in the memorandum itself which may be helpful to employers:

  • There is no mandate to participate or penalty for not participating in the deferral, so employees do have the option to decline to participate
  • Employees are not given a right to demand an employer participate in the deferral, so employers do have the option to decline to participate
  • When an employer and employee participate, the employee’s share of Social Security taxes are not withheld or paid the final four months of 2020 but then must be withheld and paid the first four months of 2021
  • Any deferred tax not repaid by May 1, 2021, will accrue penalties and interest to the employer
  • Anyone with an insufficient paycheck or no paycheck for any or all of the repayment period may be subject to other collections activity by the employer

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.