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Executive action delays workers’ payroll tax payments

By Alistair M. Nevius, J.D.

Please note: This item is from our archives and was published in 2020. It is provided for historical reference. The content may be out of date and links may no longer function.

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President Donald Trump on Saturday issued a presidential memorandum to defer the withholding, deposit, and payment of certain payroll taxes on wages paid from Sept. 1 through Dec. 31, 2020.

The presidential memorandum was one of three the president issued on Saturday as congressional negotiators struggle to find agreement on a bill to extend relief during the COVID-19 pandemic. The other memoranda involve compensation to unemployed individuals and student loan relief. The president also issued an exective order on evictions.

The deferral applies to any employee whose pretax wages or compensation during any biweekly pay period generally is less than $4,000. The tax payments are deferred without any penalties, interest, additional amount, or addition to the tax.

The deferral applies to the employee portion of the old-age, survivors, and disability insurance (OASDI) tax under Sec. 3101(a) and Railroad Retirement Act Tier 1 tax under Sec. 3201.

Treasury has the authority under Sec. 7508A to delay tax payments for up to a year during a presidentially declared disaster. The president on March 13 declared the coronavirus pandemic a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707.

Treasury is directed to issue guidance to implement the order and to explore ways to ultimately eliminate the obligation to pay the deferred taxes.

Employers have already had 50% of their portion of payroll tax payments due during the period that begins on March 27, 2020, and ends Dec. 31, 2020, delayed until Dec. 31, 2021, and the other 50% until Dec. 31, 2022, by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page.

For tax-related resources, visit the AICPA’s COVID-19: Tax resources page.

— Alistair M. Nevius, J.D., (Alistair.Nevius@aicpa-cima.com) is The Tax Adviser’s editor in chief.