August 29, 2020
Late on Friday, August 29, the IRS issued Notice 2020-65 that provides guidance regarding the payroll tax deferral. The guidance provided in the IRS Notice includes:
- Employers may defer withholding, deposit, and payment of the employee portion of FICA and Tier 1 Railroad Retirement Act taxes attributable to compensation and wages paid from September 1, 2020 through December 31, 2020.
- The deferral is determined on a bi-weekly basis for any employee whose pre-tax compensation and wages during that bi-weekly pay period are less than $4,000. Therefore, the deferral may apply to an employee during some pay periods even if it does not apply during other periods.
- Wages and compensation includes all cash and other remuneration paid to an employee reduced by the employee’s applicable wage exclusions such as cafeteria plan contributions, payments on account of an employee’s death, moving expense reimbursements, and certain other fringe benefits.
- Employers are required to withhold and pay the 2020 deferred taxes ratably from compensation and wages paid between January 1, 2021 and April 30, 2021. Penalties and interest for taxes not remitted will begin to accrue beginning on May 1, 2021.
- The notice allows employers to make arrangements to collect the deferred taxes from an employee, but does not specify how that might be accomplished.
Whitley Penn is continually monitoring the tax and economic developments related to the coronavirus pandemic and will send out additional alerts in the future. In the interim, please contact your Whitley Penn tax advisor if you have any questions or require any additional information.