The Treasury will have to fill in many gaps as it attempts to draft guidance implementing President Donald Trump’s order to delay the collection of the employee’s portion of the Social Security tax.
Trump issued a memorandum Saturday to defer collection of the tax normally withheld from employees’ paychecks to fund Social Security. The benefit lasts from Sept. 1 through the end of the year.
The memo directs the Treasury Department to issue guidance on the deferral. There are many critical questions that need to be addressed in order to implement the order to delay the collection of the employee portion of Social Security tax. At the moment, employers don’t know whether the order is mandatory, what the process will be for eventually paying back the deferred taxes, or even which employees are actually eligible.
There is also a question of how the IRS will get the money back if an employee leaves their company before January. Is the employer liable for making that payment? If the employee cannot for whatever the reason is, what are the obligations there? What happens to vacation pay, sick pay?
The memorandum is also unclear about who is eligible for the payroll tax deferment.
It applies to employees whose wages and compensation are generally less than $4,000 per bi-weekly pay period.
But it doesn’t define wages and compensation, or say whether that includes pay things like bonuses, commissions, or overtime hours. All of these are critical questions in which guidance must be provided.
Namely attended an IRS Quarterly Reporting Agent Forum on Tuesday, August 11th. A Treasury representative was present and stated that the Treasury is aware of all of the concerns noted above and is working ASAP to gather answers and guidance.
Namely does not provide legal, accounting, or tax advice. Please consult with professional counsel for any tax, accounting or legal questions.
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Emmett Swan is a Sr. Manager, Payroll Compliance at
Namely. He as over 20 years of payroll industry experience, holds the Certified Payroll Professional (CPP) designation, an active member of the National APA where he serves on the APA State and Local Task Force, Government Relations Task Force and Strategic Payroll Leadership Task Force. He is also a member of the New York Metropolitan APA chapter.
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