On August 8, 2020 President Trump issued a Presidential Memorandum directing the Secretary of the Treasury to develop guidance on allowing employers to defer the withholding, deposit, and payment of certain payroll taxes during the last four months of 2020 and then recoup those deferred amounts during the first four months of 2021. The Secretary issued that guidance on August 28, 2020 (Notice 2020-65). Listed below are some highlights of the guidance:
- The deferral applies to the employee portion of the Social Security payroll tax for applicable wages paid to an employee between September 1, 2020 and December 31, 2020.
- The deferral is applicable to employees who have a bi-weekly pre-tax wage of less than $4,000, or the equivalent threshold amount with respect to other pay periods.
- Barring a legislative change, the deferred taxes must be recouped from applicable employees beginning January 1, 2021 through April 30, 2021.
- Interest and penalties on the deferred tax will begin to accrue on May 1, 2021.
Counties who choose to implement the payroll tax deferral should consider the potential implications. For instance, the Internal Revenue Code Section 3102 generally obligates an employer to withhold an employee’s social security taxes. If an employer fails to do so, the employer may be held liable for the taxes not withheld, as well as various types of penalties. No relief is provided in Notice 2020-65 to an employer that defers payment of an employee’s social security tax if the employer cannot collect the deferred taxes later. Presumably, if an employer finds itself in that bind, the employer is obligated to pay the tax. 
It may also be worth considering the potential implications of not implementing the payroll tax deferral. Most notably, the employees of organizations who do not implement the deferral will not see the associated increase in their wages. If a legislative change occurs that makes the deferral permanent, those employees will presumably have missed the opportunity to receive the amounts that would have otherwise been deferred.
Regardless of which option is chosen, employers should be educated about potential implications and be prepared to answer questions from stakeholders regarding the choice that is made. Should you have further questions, please don’t hesitate to contact your CTAS county government consultant.