August 12, 2020

Executive Order for “Payroll Tax Holiday” Deferral

On Saturday August 8th, the President issued an executive memorandum regarding a payroll tax holiday (deferral). The memorandum directs the Secretary of the Treasury to implement a delay of certain employees’ obligations to pay Social Security taxes. The payroll tax memorandum requires guidance to be issued by the Department of Treasury. Until that guidance is issued, many of the details are unknown. Below is a summary of the key provisions of the memorandum:

  • The memorandum applies to the period September 1, 2020, through December 31, 2020.

  • It is unclear whether employers are required to implement the tax deferral.

  • The memorandum does not address what an employer should do if he decides to not implement the deferral and continue withholding payroll taxes.

  • The memorandum only applies to the 6.2 percent Social Security tax on employees. It does not apply to the employer matching obligation for these taxes.

  • The memorandum only applies to employees generally earning less than $104,000 annually.

  • The memorandum only provides a delay of the tax obligation, not forgiveness.

  • No penalties or interest shall apply to those who use the delay.

  • There is no relief specified with respect to the employers’ obligation to ultimately deposit the deferred taxes, even if the affected employees are no longer working.

It is important to keep in mind that Congress and the Trump Administration are still negotiating on a potential COVID-19 relief measure, and that a compromise bill could supersede the President’s actions. As this situation becomes clearer, we will update you on what to expect and what actions to take.


The Employer Advantage Team