Deferral of (payroll) taxes

[11Buster]

Although not entirely having anything to do with income tax, does anyone know the official status of the signing of the Memorandum by President Trump that defers certain payroll tax obligations from 9/1 - 12/31/20.  Is it going to actually be allowed and what is the protocol as of today??

[TaxGuyBill]

Duplicate post:

https://proconnect.intuit.com/community/coronavirus/discussion/presidential-memoranda-on-deferring-p...

[IRonMaN]

Just curious - did you post twice or is the system having a case of the hiccups?

[11Buster]

I posted in the COVID community also as nobody seems to know the current status, although they know what the issue involves.

[IRonMaN]

It's in limbo.

[BobKamman]

The U.S. Treasury Department still has yet to tell companies how to handle President Trump’s order delaying the due date for employee payroll taxes, leaving major employers such as Walmart Inc. in the lurch.

It’s been two weeks since Trump issued his directive deferring the deadline to pay worker’s portions of Social Security taxes from Sept. 1 to the end of the year. But employers, which are responsible for submitting those payments to the Internal Revenue Service, are waiting to hear from the agency on how any tax bill would be handled when it comes due later.

https://www.latimes.com/business/story/2020-08-25/trump-payroll-tax-deferral-irs-guidance

[sjrcpa]

Leaving nonmajor employers in the lurch, too.

[11Buster]

So it would appear to me, per IRS Notice 2020-65 reading, employers ARE required to defer withholding (and payment thereof) of employee portion of OASDI if wages paid between September 1 - December 31, 2020, are under the applicable wage limit.  Employers/employees have no choice.  Is that everyone is reading?

[qbteachmt]

"So it would appear to me, per IRS Notice 2020-65 reading, employers ARE required to defer withholding (and payment thereof) of employee portion of OASDI if wages paid between September 1 - December 31, 2020, are under the applicable wage limit. Employers/employees have no choice. Is that everyone is reading?"

Nope.

It states only that the Employer is considered the affected taxpayer, and the deferral has to be computed on specific wage limits and repaid by a specific timeframe, and how it can be collected is specifically not stated.

Employers apparently have the choice to participate or not.

And it doesn't address the Employer share; yet, they are identified as the affected taxpayer.

It's still a big mess.

Employees get to do what that employer had decided to do, based on what qualifies.

[BobKamman]

@qbteachmt And it doesn't address the Employer share

The employer share (the 6.2%, not the 1.45%)  was already deferred the way it has to be done, by legislation.  See Section 2302 of the CARES Act.  

[BobKamman]

That's like saying we all had to wait until July 15 to file and pay our Form 1040 taxes -- we didn't have a choice to do it April 15.  

[qbteachmt]

Oh, right; now we have cumulative provisions. So, they just screwed over an employer who was using the CARES act provision for Advance retention credits: "In other words, even though the employee retention tax credit is an employer Social Security tax credit, the employer can recoup the credit by reducing the tax deposits that would otherwise be made for employee federal income tax withholding, the employee Social Security/Medicare taxes and the employer Social Security/Medicare taxes."

So, optionally, the employer can decide not to withhold for Social Security, but that gives them a lesser amount to retain as their advance credit.

"That's like saying we all had to wait until July 15 to file and pay our Form 1040 taxes -- we didn't have a choice to do it April 15."

Which part? Because a person with a preparer likely did not have a choice. They had to wait for their preparer. An employee won't be given the choice, if their employer does not opt to participate. Unless they use 1040ES, and they would then have to somehow deal with the employer getting the reminder notice later based on optionally deferring the Social Security withholding and payment based on reportable Gross Wages from the final third of 2020, but that one employee already sent in their share of the funds? I don't see how that would work. Something I read mentioned putting these employees' withholdings into a trust account, especially useful for a seasonal employer or one with high turnover.

I'm waiting for the employees to realize that this Trump declaration wasn't meant to help them.