Guidance on Employee Social Security Deferral

September 8, 2020
Posted in Newsroom
September 8, 2020 Associated HCM

Guidance on Employee Social Security Deferral

As you may be aware, on August 8th President Trump released a memorandum calling for a deferral of the collection and payment of employee Social Security Tax (OASDI). This deferral was to be made available to most employees for earnings under $4,000 per bi-weekly pay period, during the period between 9/1/20 and 12/31/20. The choice to defer the tax would be optional, and at the time of the memorandum it is only a deferment, not a tax forgiveness.

On August 28th, the Department of Treasury released further guidance on this memorandum located here. Unfortunately, at this time the guidance is still lacking in complete clarity, however we were able to pull the following additional facts from this IRS publication.

  1. Deferred OASDI taxes must be repaid to the IRS between the period of 1/1/21 and 4/30/21.
    • We are still awaiting guidance from the IRS as to how these payments should be made.
  2. The repayment of these taxes will be the responsibility of the employer.
    • This means that it is on the employer to work with their employee to collect, the taxes that said employee deferred. As it is currently written, the employee will not need to pay this back at the time of doing their taxes, the onus is on the employer.
    • We are still awaiting further guidance from the IRS as to how terminated employees are to be handled.

As mentioned previously, the information given at this time is still lacking detail. The IRS has yet to inform payroll providers how this deferral will affect your 941 tax return that is due to be created in 1 months’ time. Because of this, Associated HCM will be unable to begin this deferral until we receive further guidance from the IRS.

Once the IRS does release this guidance, we will work with our software developers to ensure that we provide the best options available to our clients. However, due to the onus that is put on the employer (in this memorandum’s current form) we also recommend not allowing employees to partake in this deferral unless changes are made in the collection and payment process.

Request A Quote