Treasury Department Issues Guidance on Social Security Payroll Taxes

On August 28, 2020, the Treasury Department issued Guidance implementing an August 8, 2020, Presidential Memorandum directing the Secretary of the Treasury to defer the withholding, deposit and payment of the employee portion of social security payroll taxes during the period of September 1, 2020, through December 31, 2020, subject to certain criteria. The Guidance provides that such deferral of withholding is available for an employee only if the wages paid for a bi-weekly pay period are less than $4,000. Although the administration has indicated it will pursue a legislative change to forgive any deferred tax amounts, this outcome is by no means certain. As of this time, the Guidance provides that the employer must withhold and pay the deferred taxes from compensation paid to affected employees between January 1, 2021, and April 30, 2021, and, if necessary, may make arrangements to otherwise collect the taxes from the employee. The Guidance is not clear on several points, including whether this deferral is mandatory or voluntary for either the employee or implementing employer, how to calculate bi-weekly pay thresholds if using a 24 pay cycle, or the interplay of state wage withholding laws. School districts should consult with their legal counsel regarding implementation of this Guidance.

Contact Heather Brickman or Barb Erickson with questions.

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