Payroll Tax “Holiday” Beginning September 1, 2020

Employers who withhold the 6.2% Social Security tax from employee paychecks may now defer collection and payment of withholding amount for pay periods beginning September 1, 2020 and extending through December 31, 2020. However, the taxes are only deferred – not exempted – and must be paid between January 1, 2021 and April 30, 2021, or else penalties and interest will be applied.

While this may result in employees enjoying a boost in their take home pay this fall, it will also result in smaller paychecks early next year as employers “catch up” with collection and payment of the deferred taxes.

There are exceptions to the deferment program. The 6.2% Social Security withholding and payment of the employee’s portion of the Social Security tax can only be deferred if the employee’s wages are below $4,000 for a two-week pay period, above which the deferral cannot be implemented.

Employers appear to have the option not to administer the deferment and continue to withhold and pay the Social Security tax during the “holiday” period.

Before making a decision on whether or not to take part in the deferral program you should examine how it will impact payroll and have a plan as to how the deferred taxes will be collected next year.

This continues to be a developing situation with many unknowns remaining at this time, especially as to whether or not this will be an optional program for employers. Gray, Gray & Gray is closely monitoring information and will share updates as they are made available. For guidance and assistance on the information at hand, please call Gray, Gray & Gray at (781) 407-0300.

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