Private Employers Reject President’s Payroll Tax Deferral
Nearly two weeks after President Trump’s payroll tax deferral program came into effect, no major private employers have stepped forward with plans to forgo withholding the levy from workers’ paychecks. Costco Wholesale Corp., United Parcel Service Inc. and FedEx Corp are among those not participating.
Part of the challenge for the White House is it can’t unilaterally cut taxes and can only defer the due date. Internal Revenue Service guidelines left employers on the hook to pay back the payroll levy early next year, effectively doubling withholding from employees’ paychecks.
Among the challenges, is how companies can get the money owed from people who opt into the payroll tax deferral but leave prior to repaying their portion of the payroll tax being deferred. Other challenges include calculating the precise amount of payroll tax to pay back by the time taxes are due next year in April. If there are under-payments, discrepancies or reconciliation problems, the IRS can assess interest, penalties and additions to tax beginning May 2021, for which employers would be liable.
Trump’s August directive delayed the payroll tax due date for the 6.2 percent Social Security taxes for those making less than $4,000 bi-weekly, which amounts to about $104,000 a year. It was his latest attempt to achieve a second tax reduction after criticism that the 2017 Republican tax overhaul didn’t do enough to help middle-class workers.
Lawmakers did endorse a deferral of the portion of payroll taxes that is paid by companies and it was part of the last stimulus package, approved in March. That measure was easier for employers to administer and acted as a temporary liquidity aid.
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