Trump's payroll tax deferral—what should employers do?

On August 8, President Donald Trump issued an Executive Order directing Secretary of the Treasury Steven Mnuchin to defer the withholding, deposit, and payment of certain payroll taxes beginning September 1 through the end of 2020. The order left several important questions open and directed the Treasury to issue guidance to implement the order. Secretary Mnuchin finally issued guidance on August 28, but many questions remain.

Questions answered

Is the deferral mandatory? No. For several reasons, the president cannot force employers to defer the payment of payroll taxes that are otherwise owed under the Tax Code. Secretary Mnuchin has acknowledged neither the president nor the Treasury has the authority to force deferral.

What payroll taxes are included? The order applies only to the employee portion of Social Security taxes associated with wages paid from September 1 through the end of 2020. Further, the order applies only to employees whose wages are less than $4,000 per bi-weekly pay period (or less than $104,000 annually).

Will the payroll taxes be forgiven entirely? It isn't guaranteed the payroll taxes will be forgiven. The president's order directs the Treasury to explore avenues to forgive the deferred taxes, but it would take an act of Congress to forgive them. There's no certainty Congress will choose to do so.