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Reconciling Executive Order Regarding Social Security Withholding with IRS Guidance

September 03, 2020

As previously reported on, President Trump has issued an Executive Order requiring employers to “make available” to employees the option to defer the employee portion of Social Security taxes from September 1, 2020 through December 31, 2020. The deferral is only available to employees who are paid less than $4,000 bi-weekly. The Guidance issued by the Internal Revenue Service addresses repayment of the deferred withholdings, but does not address whether an employer is required to comply with an employee request to stop the withholding.

We recommend employers do not provide notice to employees of the deferral option and do not implement the change to withholding unless employees request to do so. If employees request to defer the withholding of the employee portion of Social Security taxes from September 1, 2020 through December 31, 2020, we recommend employers require employees to sign the following agreement: Click Here

The Guidance provides that, to repay the tax obligation that is deferred, employers may withhold additional amounts from employee compensation from January 1, 2021 to April 30, 2021. According to the Guidance, after April 30, 2021, penalties, interest and "additions to tax" will begin to accrue on employers for tax amounts that have not been repaid.

Employers, referred to as "affected taxpayers" in the Guidance, "may make arrangements to otherwise collect the total applicable taxes from the employee.” But if an employer suspends collection of an employee's Social Security tax, what happens if an employee leaves at the end of the year? According to the Guidance, the employer remains liable for the employee's share of Social Security taxes; the due date is just extended to next year. The employer can make repayment arrangements with the employee, such as deducting the amount owed from the final paycheck. Otherwise, the employer would have to pay the balance owed.

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