Important news about tax questions regarding the President’s recent executive orders dealing with the economic effects of the pandemic.

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To our clients and friends:

We continue to hope that you and yours are healthy and safe.

Three weeks ago, the President signed four executive orders that dealt with four aspects of the economic effects of the pandemic. They addressed a possible $300 federal addition to unemployment benefits if states contribute $100, totaling $400 for affected workers, deferring FICA and Medicare payroll taxes for employees making less than $104K per year, extending the CARES Act eviction moratorium, and keeping the 0% interest rate and payment deferral on federal student loans. We discussed these orders in a previous post (8-17-20).

You need to know

The FICA and Medicare deferrals have generated much discussion in the professional press. Problems identified so far with this potential program include:

• Participation by each employer is voluntary, making the potential benefit quite variable;
• The administrative complexity of implementing the deferral and tracking the liability;
• Repaying the deferred taxes; and
• The unknown risks to the employer with respect to compliance in unforeseen circumstances, such as when an employee leaves when withholding the deferred taxes should occur.

New guidance about deferred payroll taxes

On Friday 28 August, the Treasury issued guidance (Notice 2020-65) about the deadline for remitting deferred payroll taxes. Unfortunately, this notice did not address some important areas of uncertainty. We now know that any deferred taxes are to be withheld and paid by 30 April 2021, after which the normal interest and penalties will apply. The notice did not specify any process or schedule to collect or remit the deferred taxes, so it appears to be up to the employers (and perhaps employees) to determine the schedule. We also know that employers may not use the deferred deposit dates for taxes that were in fact withheld in the normal way. In other words, there’s no free loan for employers.

So, we’re still waiting . . .

We still advise employers wait for further guidance from the Treasury before implementing the payroll tax deferral. Continue withholding employment taxes and remitting according to their normal schedule. Communicate with your employees and educate them on the various implications of the payroll tax deferral.

If you have any questions regarding the payroll tax deferral matter or any tax matter, please contact us. We’ll continue to publish updates as we learn of them.

The team at Werner & Co. CPAs.