Payroll tax exective order

[Rapid Robert]

divide it by the number of pay periods in January through April

Of course, no employer knows the number of future pay periods per current employee as of Jan 1 2021. So "the number of pay periods in January through April" is just a forecast, not a known number.

[TaxGuyBill]

double-withholding (12.4%) for first four months of 2021 ... but instead working fewer hours (i.e. less pay) in the first four months than the last four months of 2020?

The notice does not say to withhold 12.4% during those months. It says to withhold the deferred amounts "ratably". So that means you take the total deferred about and divide it by the number of pay periods in January through April and withhold that specific dollar amount per paycheck. The amount of wages in 2021 would not affect that amount.

[Rapid Robert]

Defer to January through April -- ratable. I think it's just the 6.2% SS and NOT any Medicare.

Correct. It's basically defer 6.2% employee OASDI (Soc. Sec.) withholding for last four months of 2020, then to make up for it, double-withholding (12.4%) for first four months of 2021.

[EDIT: See Correction in following post}

If the 2021 withholding falls short, it is on the employer to make it up, thereby probably also requiring a balance sheet liability as of EOY 2020.

So, for example, what if the employee ends up not leaving the job in 2021, but instead working fewer hours (i.e. less pay) in the first four months than the last four months of 2020? The employer will have to make up the difference, unless "alternate arrangements" are made. So again, a huge risk for the employer.

HOW MANY Fortune 500 employers are going to go for this?

[Lion]

Defer to January through April -- ratable. I think it's just the 6.2% SS and NOT any Medicare.

[spanel]

Then the Employees first January check, you have to pay all the SS/Med back at that point that hasn't been withheld? Thats going to work really good, let me tell you.

Mostly likely this will result in one paycheck being taken for this?

7.65% of the next weekly 16 checks is 1.23 of a full check.

Good times, try to explain that your increase of a paycheck was to not get a paycheck the first week of January.

Chris

[Scarecrow]

Thanks all. If I read this correctly, if the employer does not withhold the SS tax from an employee they will have to withhold it in the first quarter of next year. I believe that will be a problem for employers because what if the employee is not working for the company any more they would still be liable for the money.

Am I misreading this?

That is exactly the problem. If the employee quits before the employer has time to withhold the tax, the employer is stuck with the bill. The employer derives no benefit for deferring the withholding of tax and takes all the risk for doing so.

My advice is no employer in their right mind would do this.

[Dusty2004]

Thanks all. If I read this correctly, if the employer does not withhold the SS tax from an employee they will have to withhold it in the first quarter of next year. I believe that will be a problem for employers because what if the employee is not working for the company any more they would still be liable for the money.

Am I misreading this?

Thanks,

Dusty

[BOB W]

This is stupid from any angle....................

[Rapid Robert]

See post #8 for a link to the IRS notice.

There is now a new draft version of Form 941, just posted yesterday. Looks like changes to Lines 13b, 24, and 25.

https://www.irs.gov/pub/irs-dft/f941--dft.pdf

[terryats]

Dusty, here is the official notice. https://www.irs.gov/pub/irs-drop/n-20-65.pdf

[kathyc2]

It took them three weeks to come up with this?

[Rapid Robert]

Thus, the IRS cannot force taxpayers to delay the payment of their social security taxes. Any guidance issued by the IRS on this subject is going to have to have an option for employees to continue to have their taxes withheld, and employers to continue to deposit the taxes that are withheld.

Well, it says:

"If necessary, the Affected Taxpayer may make arrangements to otherwise collect the total Applicable Taxes from the employee."


I wonder when we'll see a new version of Form 941?

Also, did I see something in there about the deposit obligation (versus payment of liability) not being deferred? In other words, an employer cannot withhold the employee's tax on the normal schedule, but then defer deposit until early 2021?

[rbynaker]

Here's what they came up with (not much and it doesn't answer many questions):

https://www.irs.gov/pub/irs-drop/n-20-65.pdf

Rick

[Scarecrow]

The authority being used to delay the employee's share of Social Security tax is IRC section 7508A, "Authority to postpone certain deadlines by reason of Presidentially declared disaster or terroristic or military actions." This code section simply says the IRS has the authority to delay for up to one year the filing and payment deadlines for certain taxes and that no interest or penalties apply during this period of delay. Nothing in this code section says the IRS can REQUIRE taxpayers to delay filing or paying their taxes. For example, when the April 15th deadline for filing and paying taxes this year was extended to July 15th, there was no requirement that all taxpayers must delay the filing and payment of their taxes. We always have had the option to file and pay our taxes prior to the filing deadline.

Thus, the IRS cannot force taxpayers to delay the payment of their social security taxes. Any guidance issued by the IRS on this subject is going to have to have an option for employees to continue to have their taxes withheld, and employers to continue to deposit the taxes that are withheld. My guess is the employee will have to be the one who decides whether or not taxes continue to be withheld from his or her wages.

[ATSMAN]

My clients have inquired and I told them to hold off doing anything different until final guidance is issued. We have to really be careful how we advise our clients because I can see serious issues when they have to make up the taxes not collected later on and the employee is gone!