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President Trump Signs Executive Order Directing US Treasury to Defer Certain Payroll Taxes

Following stalled negotiations about a fifth round of coronavirus relief in Congress, President Trump signed an executive order on August 8, 2020 directing the US Treasury to suspend the obligations of employers to withhold and deposit the employee share of Social Security taxes.

Key Details

  • The executive order would permit deferral of the employee share of Social Security taxes with respect to wages paid between September 1, 2020 and December 31, 2020 to employees whose wages or compensation, payable during any bi-weekly pay period, are generally less than $4,000 (calculated on a pre-tax basis), or the equivalent amount when calculated with respect to other pay periods.
  • The executive order provides that the amount of the employee share of Social Security taxes deferred pursuant to the executive order will be deferred without penalties, interest, or addition to the tax. The executive order further directs the US Treasury to explore means, including legislation, by which the obligation to pay the taxes deferred may be eliminated.
  • The executive order directs the US Treasury to issue guidance to implement the deferral, which we will monitor. Presently, it is unclear how the deferral could be implemented in practice (such as how employees will be required to repay any deferred amount that is not ultimately forgiven, including for an employee who ceases to work for an employer before any repayment is required) and whether it may withstand any legal challenges. 

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