Payroll Tax Deferral
President Trump signed several executive orders citing frustration with Congresses’ inability to pass any additional coronavirus relief. These orders ranged from the continuation of additional unemployment benefits to payroll tax deferrals. Although the intent was clearly to provide supplemental funds, the payroll tax deferral in particular created some administrative challenges. Absent an act of Congress this is not a holiday, meaning that these funds will be required to be withheld and remitted in early 2021. This creates a litany of challenges around the ability to collect, with the final onus resting on an employer to potentially remit employee portions of taxes they are liable for pertaining to an employee that may no longer be an employee of the company. Also, the double withholding amounts from employee paychecks required in the opening months of 2021 would result in lower net paychecks for affected employees. If you are an employer, we recommend you opt-out of this payroll tax deferral process as there is only downside risk. If you are an employee and your employer has not opted out, you should consider weighing the positive potential forgiveness of the deferral amount at a future date by Congress versus the negative cash flow of double withholding to pay back the deferred funds under the current executive order should Congress not forgive such amount during your decision-making process.