Deferral Option Begins September 1st.
Beginning today, employees within a certain pay threshold have the option to defer their Social Security witholding tax. The optional deferral period for the employee portion of the Social Security withholding tax (6.2%) is September 1st – December 31st. The deferral option is restricted to employees whose wages are less than $4,000 pre-tax during a bi-weekly pay period. Guidance was issued late on Friday, August 28th by the Treasury and IRS (follow the link below).
Employee Payroll Tax
Employee payroll taxes include two separate taxes: Social Security and Medicare. These two taxes together are known as FICA (Federal Insurance Contributions Act) taxes and are taken right out of each paycheck. FICA includes Social Security tax of 6.2% and Medicare tax of 1.45%. For those workers who qualify, the deferral only applies to Social Security taxes.
An article that offers a sufficiently detailed overview of the program and the key questions that are still unclear can be found below.
Employer Payroll Tax
Employers are also required to submit payroll taxes; however, under the CARES Act, they already have the option to defer the deposit and payment of the employer portion of Social Security taxes for the period between March 27, 2020 and December 31, 2020. (See IRS Guidance below.)
The IRS has published Notice 2020-65 to clarify the deferral process. (See Guidance below.)
CGA Law Firm Can Help
For more articles and informationto assist your business during the pandemic, please visit the CGA COVID-19 Business Resource Page.
If you’re interested in learning more about the forgiveness process or need assistance, please contact a CGA Business Law attorney.
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