The Treasury and the IRS have finally released guidance today on the deferral of the employee’s share of Social Security taxes pursuant to President Trump’s August 8, 2020, Presidential Memorandum. As you know from our last post, the employee portion of the 6.2% of social security tax can be deferred for wages paid from 9/1/2020 and 12/31/2020 for employees with wages or compensation of less than $4,000 paid during a bi-weekly pay period.
Although the guidance leaves some important questions unanswered, here’s what we now know:
Under the guidance, although the amounts that are not withheld will go to the employees, the ultimate liability for the taxes remains with the employer.
If the taxes are deferred, employers must withhold and pay the deferred tax ratably from wages paid to those employees between 01/01/2021 to 04/30/2021, through double withholding during that period.
The guidance also states that if the employee no longer works for the employer, the employer may “make arrangements to otherwise collect the total Applicable Taxes from the employee.”
Any amounts still owed by the employer on May 1, 2021, will be subject to penalties, interest, and additions to tax.
It is still unclear whether employers are required to offer this deferral to their qualifying employees.
At this time, there is still no forgiveness for the deferred taxes, however, the guidance requires the Secretary of the Treasury to explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred.
Employers and employees should consider the potential costs of deferring these taxes as illustrated above before participating in this deferral program.

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