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APA Responds to President’s Memo on Deferring Social Security Taxes

BY: Alice P. Jacobsohn, Esq. | 09/10/20

APA and the National Payroll Reporting Consortium (NPRC) sent a letter to the U.S. Department of the Treasury and IRS offering recommendations about how to implement President Trump’s Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster.

The memo directs the Secretary of the Treasury to defer the employee’s share of the social security tax on wages paid between September 1 and December 31, 2020. The deferral is based on wages for any biweekly pay period that is generally less than $4,000, calculated on a pretax basis, or the equivalent amount with respect to other pay periods. The memo also asks the Treasury Department to research whether the deferred amount could be forgiven without congressional action. The IRS subsequently issued guidance on deferring payroll taxes (see Payroll Currently, Issue 9, Vol. 28).

APA and NPRC asked the agencies to consider some of these priorities for implementing the memo:

  • Opt-in and -out procedures. The most important consideration for payroll is the potential burden of administering the payroll tax deferral.
  • Employer liability. The requirements should state that employers will not be liable for deferred employee social security taxes.
  • Reporting requirements. Reporting requirements should be minimized. Optimally, no new entry boxes should be added to Form W-2, Wage and Tax Statement, and Form 941, Employer’s Quarterly Federal Tax Return.
  • Pay period amount. The requirements should clarify that employers may apply only a per-pay period amount (e.g., $4,000 biweekly) to determine eligibility. Conversely, employers should not be required to calculate average wages over a period of time to determine whether to apply the deferral and there should not be a phase-out formula for employees near the $4,000 biweekly level.

Alice P. Jacobsohn, Esq., is Director of Government Relations for the APA.