Beginning today, employers can choose to defer the employee portion of federal payroll tax payments until after the first of the year, but there are risks.
Treasury and the IRS recently issued guidance (PDF) implementing the Aug. 8 Presidential Memorandum allowing employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below $4,000 in a bi-weekly pay period or its equivalent.
Those deferred taxes will have to be withheld and remitted in the first quarter of 2021 alongside the current payroll taxes. In other words, employers who choose this option would be providing employees with a little more take-home pay from now until the end of the year and a little less take-home pay from Jan. 1 through April 30, 2021.
As attorneys Melissa Ostrower and Robert Perry of Jackson Lewis point out, however, employers could wind up with a bigger tax bill for themselves.
“…if an employer is unable to repay the Social Security taxes deferred pursuant to the Notice because the employee is no longer employed by the employer in January 2021, it appears that the employer will need to repay the deferred Social Security taxes from its own funds.”