On Friday, August 28th, the IRS released updated guidance in reference for employers who are required to withhold and submit the employee portion Social Security tax.
The presidential memorandum issued on August 8th, 2020 allows for employers to defer withholding and payment of the tax for annual wages up to $104,000 ($4,000 per bi-weekly pay). This generally applies to wages earned between September 1st, 2020 through December 31st, 2020.
It's important to note that this is a deferral which means it's postponing the withholding and payment of the employee Social Security tax. Unless additional action is taken by the federal government or Congress, the taxes will be due during the period from January 1st, 2021, and April 30, 2021. Interest, penalties, and additional taxes will begin to accrue May 1st, 2021.
Keep your employees in mind when deciding the best course of action. This memorandum does not require employers to stop withholding, so in some cases, it may be better to continue the withholding so that employees are not subjected to a heavy tax burden in the spring. #tax#payroll#pay