Should employers stop collecting the 6.2% levy that is the employee’s share of social security taxes for many workers? This weekend’s Executive Order by the President said that employers could do this starting September 1, 2020. But, to be clear, if employers stop withholding taxes, will Congress forgive the deferred payments? Remember, these are deferred payments right now and there is no date as to when Congress or the IRS will require the money to be paid.
Without clarity from the Treasury Department and the IRS, employers are sadly left guessing what to do.
By way of background, the Executive Order requires the Treasury Department to postpone payroll tax deadlines for employees making up to $104,000 in annualized wages.
For California businesses, it remains unclear whether the payroll/tax deferral is optional. As currently stated, the tax code says that employers and employees are both liable for the payroll taxes. So, what happens if an employer defers paying or collecting the payroll tax and the employee no longer works for the employer? Employers should also consider the administrative cost in choosing whether to withhold and pay employment taxes if Congress ultimately agrees to pass the tax cut. Would employers then want to go through the process of applying to seek refunds of overpaid taxes?
Some are even saying that if the employer stops withholding payroll taxes, and the employee switches jobs, would the employer have to pay those taxes and would the payment of those taxes ultimately be considered wages to the employee?
Bottom line, absent concrete clarity, this Executive Order leaves employers with a whole host of minefields and question marks along the way. Thus, for any questions, RPNA urges all employers to consult carefully with their CPAs and if necessary, tax attorneys.
For general questions, feel free to call Nicholas Roxborough at 818-992-9999, ext. 222.
In the meantime, please stay safe, stay healthy and be close to your friends and families.