Social Security Employee Deferral
We would like to offer our opinion on the new Executive Order from President Trump regarding the social security employee deferral. Please read our message below and should you have any questions or concerns, as always please feel free to contact our office. Additionally, should you need to refer back to any of the correspondence that we have sent throughout the Covid pandemic, all the information is available in the News section of our website: www.gpallc.net.
There is a new Executive Order from President Trump called “Social Security Tax Deferral” that becomes effective today, September 1, 2020. It allows the 6.2% Social Security tax that is withheld from employees’ paychecks to not be deducted/withheld from today through December 31, 2020. Eligible employees are those that are paid less than $4,000 biweekly. This is determined for each pay period disregarding what was paid for any other pay period.
The tax isn’t a relief of paying this tax; it is simply being deferred until next year. Critical point. The tax that now is being deferred MUST be paid back by the employee between January 1, 2021 and April 30, 2021, in addition to their regular withholdings so it is really doubling this tax for employees on payrolls in the early part of 2021 until it is all paid back. It would essentially create a tremendous cash crunch for employees next year. Employees would get a brief, small break now but it will cost them next year.
It is possible that these taxes could be forgiven but it is only talk, right now. Congress only has the power to do this. Nothing to rely on at this point.
There are too many open-ended issues such as what happens if an employee quits and you haven’t gotten to withhold those taxes due in 2021? What if only some employees want to do it and others don’t? Certainly, it creates many reporting issues which can become costly for the employer. We find that this plan is just plain unworkable.
Based on these facts, we strongly recommend that you do not participate in this program.