Matt Keefer
President Trump recently issued a Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster deferring the withholding, deposit, and payment of employee payroll taxes through the end of the year.
Matt Keefer, Director of Tax Services at Gorfine, Schiller & Gardyn (GSG), discusses key takeaways from the recent executive order.
Q: What are the details of the memorandum when it comes to employee payroll tax obligations?
A: President Trump issued an executive order on August 8th that defers the employee Social Security tax, or the 6.2% tax, that's withheld on your wages. It's important to note that it’s not for everyone. This order only applies to those receiving wages of $4,000 or less on a biweekly pay period, or about $100,000 a year. It applies during the pay periods from September 1, 2020 through December 31, 2020. Employers are not going to be withholding the 6.2% of the Social Security tax from the employees’ pay.
At this time, there is not much guidance on the executive order. President Trump has directed the Treasury Department to explore avenues and provide additional guidance on the topic, and, hopefully, for most taxpayers, the potential eliminating of the obligation to pay the deferred tax.
Q: What are some of the more important takeaways from the executive order?
A: I think the primary focus is that it is temporary; it's a deferral. People need to be aware of that. Your employer is not going to withhold this tax, but you may need to pay it back. Also, there's no timeline as to when you’re required to pay it back.
What I recommend is that it may be wise to put this money aside into an account, knowing that you're going to have to pay it back, as long as you can afford to do that.
Q: How can GSG’s services help in today's climate, both for businesses and individuals?
A: Our team helps individuals with adjusting their withholding to account for this deferral of the employee payroll taxes. Instead of putting the money aside in an account, what we would do is increase the employee's income tax withholding. This offsets what might be due in the future.
We’re also dealing with the tax law changes that have transpired in the past few months. Our team is here to help out with questions in relation to any of those changes and any tax planning ideas that have developed from those changes.
As more guidance is released regarding the deferral of payroll tax obligations, our team will be sure to keep you updated with the necessary information you need. Please contact us with any questions or concerns.
About the Author:
Matt has more than 15 years of public accounting experience. His responsibilities include preparing and reviewing income tax planning for corporations, partnerships, individuals and not-for-profit organizations, responding to federal and state tax notices, tax planning for high net worth individuals, and representing taxpayers before the IRS and state governments. For more information, click here.