9/1/20
On August 8, President Trump signed a Presidential
Memorandum that permits the deferral of the employee portion of Social Security
taxes for employees from September 1, 2020 to December 31, 2020. (This is the
6.2% deducted from salaries for Social Security.) There has been a month of
uncertainty about this action because there was a suggestion that taxes might
be waived at some point rather than deferred.
It was also unclear what would happen if an employee left employment
prior to repaying the deferred amounts.
Employers, including FCPL, have been waiting for clarification.
On August 28, the IRS issued brief guidance, which
indicates that the deferred taxes would be withheld and remitted between
January 1, 2021 and April 30, 2021. In
short, employees would pay 0% (instead of 6.2%) from September – December 2020,
but would pay 12.4% from January – April 2021, returning to 6.2% in May 2021. It is still not clear how a separating
employee would repay the deferred taxes, but it is clear that interest and
penalties for the employer would begin to accrue in May 2021 if any taxes
remained unpaid.
Employer participation in this deferral is voluntary and I
have decided that FCPL will not participate.
Based on the current information available, there is no long-term benefit
to employees. This is a deferral of the
payroll tax, not a suspension. If FCPL
deferred payroll taxes, employees would see a 4-month increase in take-home
pay, followed by a 4-month significant decrease in take-home pay, as the regular
Social Security deduction would be doubled to repay the deferred amount. Instead, FCPL will continue to withhold and
remit the 6.2% Social Security payroll tax as usual, ensuring that employees’
pay remains stable.
If you have any questions, please let me know.
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