The President signed an executive order that was issued on August 8, 2020 that allows employers to participate in a voluntary program to defer withholding of the payroll tax attributable to social security (6.2%) on wages paid out between September 1 and December 31, 2020.
This voluntary program became effective yesterday (Sept. 1).
It is the WASB’s opinion that the employer has an option as to whether or not to opt into the program to defer the withholding and payment of the employee’s portion of the Social Security Tax. Please see the information from the IRS that describes the guidance:
IR-2020-195, August 28, 2020
WASHINGTON — The Department of Treasury and Internal Revenue Service today issued guidance (PDF) implementing the Presidential Memorandum issued on August 8, 2020, allowing employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below a certain amount.
Notice 2020-65, posted today on IRS.gov, makes relief available for employers and generally applies to wages paid starting September 1, 2020, through December 31, 2020.
The employee Social Security tax deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately. No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a bi-weekly pay period.
Today’s notice postpones the time for employers to withhold and pay employee Social Security taxes.
Additional (information about) tax relief related to the COVID-19 pandemic can be found on IRS.gov.
In consultation with tax attorneys, it appears that many are advising employers against implementing the deferrals due to the following reasons: (1) many employers (and third-party payroll providers) have not had time to implement software changes to payroll systems required to handle this change in withholdings; (2) there are no guarantees that the deferred amounts will be forgiven in the future by an act of Congress; (3) the IRS Guidance requires the affected employers to collect the deferred amounts in the future; and (4) employers who implement the deferral may be liable to the IRS for such deferred amounts in the future if the employee does not pay the money back.
For specific guidance in your situation, we (the WASB) would suggest that school districts contact their legal counsel and/or auditor.