Payroll Tax Deferral: Proceed With Caution
The latest panacea to the pandemic is the Payroll Tax Deferral, whereby employers can opt not to withhold the Social Security tax (Medicare must be continued to be withheld) on employees whose annualized salary does not exceed $104,000 ($2,000 per week).
Deferral is the key word here!
The deferral period of the 6.2% tax began on September 1, 2020 and continues through the end of 2020.
Employees will have to pay the deferral back between January 1, 2021 and April 30, 2021.
Participation is at the discretion of the employer.
Oddly enough, if the employee leaves the employer, the latter may be on the hook for the deferral.
With such uncertainty in the legislation, we advise to not participate unless the only employees are key employees falling within the salary limits.
In that case, save the deferred amount for repayment in the first quarter.
Trump is urging Congress to forgive the liability.
If that happens, how would those who did not participate be compensated?
We will keep you updated with the latest information.