Employee Deferred payroll taxes – IRS says companies are responsible

The Internal Revenue Service said companies will be responsible for collecting and paying back any deferred payroll taxes under a directive by President Donald Trump aimed at helping workers while the administration and Democrats are stalemated on a stimulus deal.

The agency issued guidance Friday that implements Trump’s order to delay the due date for payroll taxes for millions of workers from Sept. 1 through year-end.

Employers can defer the withholding, deposit, and payment of the employee portion of the Old Age, Survivors, and Disability Insurance segment of FICA taxes, i.e., the 6.2% tax on employee wages imposed by section 3101(a) of the Internal Revenue Code and the equivalent amount under the Railroad Retirement Tax Act (RRTA) imposed by section 3201(a). The deferral applies to taxes on wages paid from September 1, 2020, through December 31, 2020. The payroll taxes are deferred, not forgiven.

The Notice does not directly state whether the payroll tax deferral is optional for employers. However, based on the authority on which the guidance relies (Internal Revenue Code section 7508A), it appears that employers can choose whether to implement the deferral.

The Notice provides that employers must withhold and pay any deferred payroll taxes from employee wages and compensation paid from January 1, 2021, through April 30, 2021, on a ratable basis. The Notice also states that if necessary, employers can “make arrangements to otherwise collect” the deferred taxes.

The guidance puts the responsibility on employers for ultimately paying back the levies.

The payroll tax deferral is available with respect to employees who have wages and compensation of less than $4,000 in a given biweekly payroll period during the September 1 to December 31 deferral period, or an equivalent amount for other payroll periods.