Impact of Executive Order for Payroll Tax Holiday
Updated: Sep 15, 2020
On Saturday, August 8, 2020, The White House issued a Memorandum to the Secretary of the Treasury. The order was to defer withholding and paying of employee's portion of Social Security taxes from September 1 to December 31, 2020. This is for employees making less than $4,000 per bi-weekly period ($104,000 per year). The tax is not forgiven but currently delayed. The collection period would be from January 01, 2021 to April 30, 2021. This would create a larger liability for employee's during this future period. So this is more than "May" have to pay the money back at this time. There is consideration to forgive the tax in the future but this is currently not the case and would require legislation.
Even though there is currently not clear guidance, Treasury Secretary Steven Mnuchin has said employer participation would be optional. At the time of this post, employers would be responsible for the payroll tax liability when it comes due. The American Institute of CPAs (AICPA) has submitted the following to the Department of Treasury and Internal Revenue Service on August 12, 2020 . This provides a list of considerations and recommendations from the AICPA.
Please seek guidance from your tax professional.
The IRS issued guidance on August 28, 2020 (in our humble opinion - without much clarity).
Sage is reviewing all of this information. They have stated a software update is expected at the end of September. They indicated a manual process to work around the issue until the software is updated. We will keep you up to date as more information becomes available.
Follow this link to Sage City where a Sage employee stated the update and a possible work around.