About Employee Social Security Withholding Deferral
1. IRS guidance issued to implement Presidential Memorandum deferring certain employee Social Security tax withholding
On August 8, 2020, President Trump issued a Presidential Memorandum directing the Secretary of the Treasury (Secretary) to use his authority pursuant to section 7508A of the Internal Revenue Code (Code) to defer the withholding, deposit, and payment of certain payroll tax obligations.
1.1 Applicable Wages
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.
The determination of Applicable Wages is made on a pay period by pay period basis starting September 1, 2020, through December 31, 2020.
1.2 Payment of Deferred Applicable Taxes
The IRS released Notice 2021-11 addressing how employers who elected to defer certain employees' taxes can withhold and pay the deferred taxes throughout 2021 instead of just the first four months of the year. Deferred payroll taxes not paid during this period will be subject to interest and penalties.
2. The choice to defer Social Security tax is optional.
3. If your company will defer employee Social Security taxes, please make sure both you and your employees understand:
3.1. This is a deferral of the payroll tax and not an exemption.
3.2. The deferral would only apply to the Social Security portion of employee wages.