On August 8, 2020, President Trump signed an Executive Order that delays the collection of the employee portion of Social Security and Medicare for those who earn less than $4,000 every two weeks, or about $104,000 annually. The deferral will start September 1, 2020 and run through December 31, 2020. The order comes after lawmakers were unable to agree on additional COVID-19 relief funding. While the CARES Act allowed businesses to defer payroll taxes earlier this year, this new order defers the employee side of payroll taxes.
More information is expected to be released as lawmakers determine logistics. Below, we’ve outlined what we know now:
- This is a deferral and not a tax cut. This means that the employees will at a later point need to pay the deferred amount in taxes. The president is hoping that Congress converts the deferral into a tax cut eventually.
- The IRS is creating a process to allow this deferral to take place and more guidance is expected in the coming weeks for employers.
- One option that people are requesting is to allow employees to opt-in (or opt-out) of this deferral but it is currently unclear if this will be an option.
Ultimately, employers and employees alike will need to await further guidance before taking action.
The Aldrich team is closely monitoring the executive order updates and guidance. We’ll be updating our COVID-19 Resource Center diligently to keep you apprised of changes as they happen. If you have any questions about the PPP loan forgiveness application, reach out to your Aldrich Advisor.
