KingSpry | HR Law Update Executive Order Payroll Taxes Deferral

HR Law Update: Executive Order Defers Payroll Taxes Through COVID Period

Posted on August 13th, 2020
by Ellen C. Schurdak

On August 8th, President Trump issued an executive order which permits the deferral, withholding, and payment of some employees’ wage taxes from September 1, 2020 through December 31, 2020.

This order, entitled “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster,” applies to employees who are generally making less than $4000 during a two-week pay period.

The deferral does not affect state taxes and is limited to deferring payment of the tax known as The Old Age, Survivors and Disability Insurance tax. This federal tax is currently taxed at a 6.2% rate of an employee’s wages up to an annual cap of $137,700. After an employee earns $137,700, The Old Age, Survivors and Disability Insurance tax is no longer imposed.  The federal Medicare tax remains unchanged under the President’s August 8th order.

The Unites States Treasury Department is tasked with implementing the President’s executive order.

Many questions exist:

  • May an employee elect not to have the federal tax deferred?
  • When will the tax deferments be due?
  • Will employers be responsible for making employees deferred tax payments through future  wage withholdings and, if so, what happens when an employee changes employers or is no longer employed as a W-2 wage earner?

KingSpry’s Employment Law Practice Group will continue to keep you informed as the Treasury Department issues guidance on the implementation of President Trump’s order.

If you have any questions, you may contact your own employment counsel, or you may contact me at ecs@kingspry.com. As always, we will keep you updated!

HR Law Update is a publication of the KingSpry Employment Law Practice Group. HR Law Update is meant to be informational and does not constitute legal advice.