FICA Tax Deferral Recommendations

On Friday, August 28, 2020, the IRS issued guidance for implementing the employee FICA tax deferral from the August 8, 2020 Executive Order.

Based on the information received, “employers that are required to withhold and pay the employee share of security tax” are “affected taxpayers.” Therefore, the employer is the “affected taxpayer.”

It goes on to say the due date is postponed for the “affected taxpayer.” While the due date is postponed, the taxpayer does not have to use the postponed due date. It is a choice and the taxpayer can choose to use the original due date.

Because the employer is the “affected taxpayer” and the deferral applies to “affected taxpayers” it is the employer’s choice, not the employee on whether to defer the withholding or not.

If the employer chooses to defer the withholding, it would be the employer’s responsibility to later withhold any deferred taxes during 1/1/21-4/30/21 payroll periods. It would also be the employer’s responsibility to make arrangements to collect the tax from former employees if they are no longer working during that time period.

Because this is a choice and not mandatory, we advise you to not defer the withholding. Continue payroll withholding, as is. This will avoid additional costs and burdens that would be associated with extra administrative time.