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Social Security Tax Deferral : What You Need to Know

Written by Admin | May 8, 2024 6:16:57 PM

American workers have been hit hard by the Coronavirus Pandemic. To help ease the impact of this ongoing disaster President Trump has administered a variety of programs to assist workers. On August 8th, 2020 President Trump signed several executive orders one allowing 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. 

How It Works

  • 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 Internal Revenue Service (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.
  • The amount deferred shall be done without penalties, interest, additional amount or addition to the tax.
  • It is important to track these unpaid taxes for each individual who opts in due to the mere reason that they will need to pay them back.

On August 28th, The IRS provided guidance to employers on how to apply the memo in regards to the applicable wages and due date of deferred social security taxes via Notice 2020-65.

This small but targeted action was initiated to put money directly into the pockets of American workers and generate additional incentives for work and employment at such a critical time when money is needed most. 

***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.***

For a more in depth explanation on this Social Security Tax Deferment please refer to The Memorandum For the Secretary of The Treasury.

If you would like further guidance on this deferment or have any general questions you may call the Notice 2020-65 Hotline at (202) 317-5436 (not a toll-free number). 
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