08.14.20 | Client Alert – COVID-19 Update
On August 8, 2020, President Trump signed an executive order to defer payroll taxes from September 1 to December 31, 2020. This order only affects and defers the employee’s obligation to pay the 6.2% social security tax for employees with a biweekly pre-tax income of less than $4,000 (which is equivalent of $104,000 annual salary). The order does not apply to the 1.45% employee’s share of Medicare tax.
While the President has publicly announced the intention to forgive the payroll tax deferment and the order specifically instructs the Treasury to look into ways to eliminate the deferred amount, actual forgiveness will likely require Congressional action. Without a change in the law, either the employee or the business will likely still be obligated to remit the deferred taxes after the deferment period (at the beginning of next year).
Many questions remain on the implementation of the executive order, including whose obligation it is to repay in the event the amount is not forgiven or whether the forgiveness will be taxable. Berdon will provide more information when guidelines become available from the IRS and Treasury. In the meantime, please contact your Berdon advisor should you have any questions.