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Update: Executive Order to
Suspend Payroll Taxes
President
Trump signed several executive orders on
Saturday, August 8. One of these orders allows for the suspension of Social Security tax
collection for individuals making less than $4,000 on a
bi-weekly basis, and is effective September 1 through December 31, 2020. On August 28, the IRS provided
guidance to employers on how to apply the memo in respect to the
applicable wages and due date of deferred social security taxes via Notice 2020-65.
Here's what this could
mean for you:
- Employers may defer the
employee share of Social Security Tax on any wages normally subject to
Social Security up to an amount of $4,000 in compensation paid
bi-weekly or equivalent with respect to other pay periods.
- The limit of $4,000
should be applied on a per pay period basis without regards to amounts
paid in other pay periods.
- The deferred amounts must
be withheld from employees during the period of January 1 through April
30, 2021 and remitted to the IRS before May 1, 2021. If necessary,
employers may make arrangements to collect the total applicable taxes
from the employee in the event payroll withholding is not available.
It is
important to note that Congress could choose to waive these payments.
This would require legislative action; until that occurs, taxpayers
should be prepared to remit these funds to the IRS next year.
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