Taxman deferred: Treasury issues guidance on president’s payroll tax deferral

Presumably spurred on by a desire to provide some pre-election fiscal stimulus in light of Congress’ failure to arrive at a third COVID-19 relief bill, President Donald Trump unilaterally issued a memorandum on August 8 allowing employees to defer their share of certain federal payroll taxes. Most employers, who are overwhelmed and probably “drinking from the fire hose” of endless coronavirus regulations, were understandably clueless about how this all would work. What taxes are deferred? How does a deferral work? Who makes the deferral decision? Do we have to pay the deferred taxes later? On August 28, the U.S. Treasury Department issued some needed guidance. For reasons set forth below, many New York employers may want to take a pass.

How this works

President Trump’s memorandum allowed employees earning less than $4,000 per paycheck on a bi-weekly basis to defer payment of the tax imposed by 26 U.S.C. 3201 (i.e., the Social Security tax) from September 1, 2020, until December 31, 2020.

The U.S. Treasury’s guidance confirms the employee’s portion of the taxes from “applicable wages” may be deferred and that would be owed in installments to be repaid between January 1, 2021, and April 30, 2021. The guidance doesn’t indicate whether employees need to consent to the deferral (and later repayment) of the taxes.