Wolters Kluwer Tax & Accounting announced the publication of its latest tax briefing titled “2020 Payroll Tax Deferral Order,” which is now available as a complimentary download and can also be accessed through the CCH AnswerConnect online research platform. The briefing highlights current developments with respect to tax issues in response to the COVID-19 pandemic and expert analysis of the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster signed by the President of the United States Donald J. Trump on August 8.
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“Congressional efforts to enact a fourth phase of COVID-19 related tax legislation have resulted in an impasse. With expanded unemployment benefits set to expire at the end of September, 2020 and the COVID-19 pandemic continuing to worsen in many parts of the country, President Trump has just signed four executive orders in an attempt to provide some interim assistance,” said Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax analyst for Wolters Kluwer Tax & Accounting. “While three of the executive orders are not tax-related – addressing enhanced unemployment payments, eviction moratoriums, and student loan relief – the fourth executive order defers payroll taxes from September 1, 2020 to December 31, 2020. The latest tax briefing from Wolters Kluwer helps bring accounting professionals and business and individual taxpayers up-to-date on current tax developments with respect to COVID-19.”
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Key items in current COVID-19 tax developments include:
- COVID-19 legislation. The House, Senate, and President Trump’s administration have so far been unable to agree on an additional round of COVID-19 legislation. Tax items under consideration include a second round of economic stimulus payments, expanding the employee retention credit, and new COVID-related tax credits
- Payroll tax deferral. President Trump’s administration had been pushing for payroll tax forgiveness, but neither the House nor the Senate have endorsed the proposal. The President’s executive order provides for a payroll tax deferral from September 1 to December 31, 2020. The Administration felt that it only had the power to issue a deferral, not a forgiveness, order. The order only addresses the 6.2 percent employee’s share of Social Security taxes but does not apply to the 1.45 percent employee’s share of Medicare taxes
- Income limit. The payroll tax deferral only applies to employees with bi-weekly pre-tax income of less than $4,000
- Treasury guidance. The US Treasury is expected to issue guidance on how the deferral will work and address several uncertainties. It appears under the order that employers that defer the payroll taxes would have to start collecting those taxes from payroll beginning in January 2021
- Employer response. It is not clear at this time if employers will start deferral immediately given such issues as whether the deferral is optional or required, the possible inability to recover deferred taxes from employees at a later time, and possible litigation over the legality of the executive order. Some employers may have already deferred payroll taxes starting earlier in 2020 under provisions of the CARES Act, a portion of which is also due to be repaid in 2021
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