Deferring Employee Social Security Tax beginning September 1, 2020
Last updated September 1, 2020

The Presidential Memorandum issued August 9, 2020 allows (but does not require) deferment of employee social security for some payrolls from September 1, 2020 through December 31, 2020.

Should my company defer these taxes?

It seems that the majority of payroll/accounting advisors are suggesting that employers NOT defer these taxes, for several possible reasons:
  • Most are assuming that the tax will NOT be forgiven in early 2021.
  • At present, it appears that the EMPLOYER will be held responsible for paying the deferred taxes between 1/1/2020 and 4/30/2020. Beginning 5/1/2020, interest and penalties will likely be imposed on the unpaid taxes.
  • Employees for which taxes were deferred may no longer be working for the company, leaving the employer fully responsible for the deferred tax.
  • The effect on an employee’s paycheck will likely be minimal (per pay period), but they will be saddled with an extra tax debt in early 2021 for the full amount of the deferred tax.

How would I defer the tax within WAMS, should I choose to do so?

  • This would currently handled by simply zeroing the Employee Social Security tax, for each employee, during the calculation of payroll (for payrolls under the $2,000 per week limit). We have discussed adding a switch/option to do this, depending on the number of employers that actually choose do it (but we have not yet done so).
  • The total employee Social Security tax that is reset to $0 during payroll will appear on 94x tax reports as a discrepancy in the calculation of Social Security Tax, since the unpaid amount is still considered “taxable”.
  • We can easily provide a printable query or add a report to WAMS to show the deferred employee Social Security tax more clearly, should any employers choose to actually ALLOW deferment
  • The W2 will likely be updated to report deferred employee tax, though nothing has been announced at this point.

Additional information about the optional tax deferment

  • This involves only the EMPLOYEE half of Social Security does NOT apply to the employer half, or any other payroll taxes.
  • It can apply only to payrolls from 9/1/2020 to 12/31/2020.
  • It is allowed only for employee paychecks less than $2,000 weekly (which can mean deferral is allowed on one paycheck and not on another for the same employee)
  • IRS Notice 2020-65 (Aug 28, 2020) provides simple guidance on this deferral (see links below)
  • The latest draft of Form 941 adds line 24 to record the “Deferred amount of the employee share of social security tax included on line 13b”. Line 13b records the “Deferred amount of social security tax”, the amount of social security tax for which an employer is allowed to defer payment until 2021/2022 (based on the CARES Act of March 2020).

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This page is provided for informational purposes only and is not meant to constitute legal or accounting advice. You should review all information on your own and discuss with your payroll/accounting advisors.