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Payroll Tax Deferment Ordered

defer payroll tax

1.5 minute read

President Trump recently ordered the Treasury Department to defer collecting certain payroll taxes from September 1 to December 31, 2020. The payroll taxes will need to be recouped at a later date unless the Treasury Department can find a way to eliminate the obligation to pay the taxes.

Employers will be able to defer taxes that help pay for Medicare and Social Security for any individual that receives less than $4,000 during any bi-weekly pay period on a pre-tax basis.

Taxes are deferred without interest, penalties, additional amounts, or addition to the tax. It’s believed that deferring this tax will help to alleviate some hardship of individuals affected by the COVID-19 pandemic.

There may be obstacles for implementation. Currently, employers are responsible for withholding the proper amount of payroll taxes for their employees. Making changes to payroll processes and procedures is not always a quick and easy process and the Treasury Department has only a few weeks to implement and issue guidance. Also, there’s the possibility that deferred taxes will need to be collected at a future date.

Employers may want to evaluate how quickly they can alter their payroll practices and procedures in case they decide to opt for this payroll tax deferral. Make a risk assessment about balancing the benefit of releasing affected taxes to eligible employees against the possibility of having to recoup those taxes later.

Download the bulletin for more details.

This blog is intended to be a compilation of information and resources pulled from federal, state, and local agencies. This is not intended to be legal advice. For up to the minute information and guidance on COVID-19, please follow the guidelines of the Centers for Disease Control and Prevention (CDC) and your local health organizations.

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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Steve Smith

Steve Smith

Steve Smith, Employee Benefits Consultant for National Insurance Services, has his energy level permanently set at “high.” His maxim is “work hard, play hard.” Steve’s an expert in getting groups of people working together for a higher cause. Minnesota schools, cities, and counties rely on Steve’s unique and creative ideas of engaging employees in their own health and wellness to lower utilization trends. He has 20+ years in the health insurance field doing compliance, cost mitigation, utilization, analytics, wellness plans, and strategic planning. Steve is a licensed insurance agent and holds the designations for Managed Healthcare Professional (The Health Insurance Association of America), Certified Patient Protection and Affordable Care Act Professional (National Association of Health Underwriters), and Group Benefits Disability Specialist (Hartford School of Insurance). He specializes in Employee Benefits Consulting for Minnesota schools, cities, and counties including fully insured, self-insured, and stop-loss plans.