Four executive orders, each dealing with a separate topic, were signed on Saturday, August 8th.
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To our clients and friends:
We continue to hope you are well and finding ways to work and take care of your responsibilities as the pandemic continues. As part of our responsibility, we offer this update with respect to the four executive orders that were signed on Saturday August 8th.
Reminder!
Before getting into specifics on the signed orders, we would like to remind all clients that participated in the PPP loan program to hold tight before applying for forgiveness. The forgiveness application is still being re-worked and we expect to see a simpler forgiveness application for loans under $150k.
The 4 executive orders concern:
- Unemployment benefits
- FICA and Medicare withholding
- Eviction moratorium
- Federal student loans
As virtually every news outlet reported, there are four orders, each dealing with a separate topic. The most widely discussed is the reworking of the federal addition to state unemployment benefits. In sum, it provides for replacing the $600 federal payment that ended on 31 July with $300 in federal disaster funds and a $100 match from state funds. Also receiving significant attention is the order creating a deferral of employee payments of FICA and Medicare withholding for people earning less than about $104,000 per year, more on that topic below. The third order deals with possibly extending through 31 December the eviction moratorium that expired at the end of July. Last, and simplest, is the order dealing with federal student loans. It extends both the 0% interest rate and the moratorium on required payments until 31 December 2020.
We anticipate further clarifications
A greater number of complications exist around the payroll tax deferral that may begin September 1st. First, there is the fact that it is a deferral, not a cancellation. Confusion comes around the twin issues of when & how to collect the deferred liability and the most workable seems to be that IRS would need to add a section to all versions of Form 1040 to both calculate and report the deferred tax due. Employers and payroll companies are right to wonder how they could reprogram their payroll systems to stop the withholding. Some commentators suggested employers could park withheld but unpaid funds in escrow accounts. For sophisticated employers, this could amount to an interest-free loan of the employees’ cash, perhaps until Congress forgave the deferred liability. This would be an unintended consequence that does nothing for the intended beneficiaries. As an employer, you are not forced to comply with the payroll tax deferment.
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As with the programs created by the CARES Act in the spring, there is much left unsaid in the practical application of these orders, so we wait for guidance now as we did before. Be assured that as soon as we learn anything about implementing any of these new orders, we will pass it along as best we can. Until then, please ask any questions that may come to mind.
The Team at Werner & Co.
