If you’re still wondering whether or not to defer your employees’ Social Security taxes for this fall, you may want to review Connell Foley’s latest blog post. Attorney Marianne C. Tolomeo examines the guidance issued by the IRS and the issues employers should consider when deciding.
Connell Foley is NJBIA’s Employment Law Resources provider.
The program, created by presidential executive order, allows employers to skip withholding and payment of the Social Security portion of employees’ payroll tax from Sept. 1 to Dec. 31, 2020, provided the pay for any two-week period is less than $4,000.
The deferred taxes must be paid back starting the first of the year, from Jan. 1 to April 30, 2021.
“In other words, employees will be subject to double withholdings of Social Security taxes from January to April 2021,” Tolomeo writes. “Thus, the sole benefit to employees appears to be the time value of money, that is, having the money in their pockets now and paying the taxes later.”
She notes that President Donald Trump would like to excuse this liability altogether, but that would require an act of Congress. That’s significant because the IRS guidance makes clear that responsibility to collect and pay the deferred taxes lies with the employer.
“For employees who remain actively employed during early 2021, this should not pose significant problems,” Tolomeo says. ”If, however, an employee no longer works for the employer in early 2021 (due to voluntary separation, termination, furlough, a leave of absence, etc.), the employer is likely to have difficulty collecting the deferred taxes since there are no wages from which to withhold.”