On August 8, 2020, President Trump signed memorandums directing the Secretary of the Treasury “to defer the withholding, deposit, and payment” of the employee share of social security tax on wages paid between September 1 and December 31, 2020; and directing the Secretary of Education to extend student loan relief until December 31, 2020.
Payroll Tax Deferral
The Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster directs the Secretary of the Treasury “to defer the withholding, deposit, and payment” of the employee share of social security tax on wages paid between September 1 and December 31, 2020.
The deferral is applicable to employees who are paid wages for a biweekly pay period that are generally “less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.” This limits the deferral to employees earning under $104,000 per year.
This is a deferral of the tax liability, not a waiver. The memorandum directs the Secretary of the Treasury to use his authority pursuant to IRC §7508A, which allows the Secretary to postpone certain tax deadlines for up to one year during a federally declared disaster. The memorandum also directs the Secretary to “explore avenues, including legislation, to eliminate the obligation to pay the “deferred taxes.”
Student Loan Relief Extended
The Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic directs the Secretary of Education “to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020.”
APA will provide additional guidance on these developments once additional information is available from the government agencies on how these directives will be implemented.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!
Curtis E. Tatum, Esq., is Director of Federal Payroll Compliance for the APA.
