YPTC Alert: Presidential Executive Order & Memoranda
September 2, 2020
Topic: Recent Presidential Memorandum on Deferring Some Payroll Tax Obligations
YPTC Position: We recommend that you wait for additional guidance from the IRS to decide whether to implement the deferral of the 6.2% OASDI (Social Security) tax provided for under the August 8 presidential memorandum.
While the IRS did issue limited guidance last week, we feel many critical questions were left unanswered.
The guidance defined the repayment period as January 1 – April 30, 2021. Any taxes deferred between now and December 31, 2020 must be repaid during the first four months of the next calendar year. We believe this could pose an unintended hardship on some employees.
Secretary of the Treasury, Steven Mnuchin, has said that the employee social security tax deferral outlined in the presidential memorandum will not be mandatory.
The guidance leaves unanswered the question of who repays any taxes deferred for employees who leave the organization before those taxes can be withheld. This exposes employers to the risk of paying those taxes themselves on behalf of former employees.
- Monitor the Treasury Department and IRS websites for announcements that provide guidance and other developments. Exercise caution before making payroll system changes in the absence of further guidance.
- Talk to your payroll department, payroll providers and human resources personnel to determine how they are preparing for the potential implementation of the payroll tax deferral if it becomes necessary.
- Prepare to address employee questions.
Here is the text of the original presidential memorandum:
Here is the IRS Notice 2020-65 released late last week:
As we learn more, we will send further update(s).