On August 28, 2020 President Trump released an executive memorandum allowing employees to defer their Social Security/Medicare withholding for the period September 1, 2020 through December 31, 2020. Here is a summary of the description and the unknowns for providing this referral:
- Employer may defer withholding of Social Security/Medicare from each employee for the fourth quarter of 2020. There is a bi-weekly gross payroll limit of $4,000 with pro-rata adjustments based upon your normal payroll period.
- There is no mention of employer portion of Social Security/Medicare being deferred so we assume this means your normal 941 deposit will include employee federal withholding and employer share of Social Security/Medicare
- The employee will be required to have this deferred tax repaid through withholding by the end of April 2021.
- There is no mention of who is responsible for this unpaid withholding if the employee quits your job or is terminated.
- There is no mention that this change is mandatory so we assume participation by the employer is optional.
- There is no mention of how we should handle this procedural change and what impact it will have on our fourth quarter 2020 Quarterly report or the first and second quarter 2021 Quarterly reports. It is doubtful many payroll software suppliers will have adapted their products to accommodate this change so it will require manual override.
- There is no mention of how to handle reporting if some employees want to defer their withholding and some do not. The record keeping demands could be enormous.
As an Employer, you appear to have the option to participate in this deferral or not. It is up to you and we will do all we can to assist with your decision. If you would like to read the memorandum, click here.