The Status Of Business Payroll Tax Deferral

0
The Status Of Business Payroll Tax Deferral
<a href="https://pixabay.com/users/mohamed_hassan/">mohamed_hassan</a> / Pixabay

The current status of business payroll tax deferral

Know more about Russia than your friends:

Get our free ebook on how the Soviet Union became Putin's Russia.

Q2 2020 hedge fund letters, conferences and more

On August 28, the IRS and Treasury published Notice 2020-65, which provided guidance for employers on President Trump’s executive order on payroll tax deferral. An executive order signed by President Trump in early August provides a payroll tax holiday for American workers that can be implemented starting today.

After 10.1% Return In 2020, Mohnish Pabrai Changes Strategy [2020 Letter]

Mohnish PabraiMohnish Pabrai's flagship hedge fund, the Pabrai Investment Fund II, returned 29.6% in the second half of 2020. Following this performance, the fund returned 10.1% net for the year, underperforming the S&P 500 but outperforming the Dow Jones Industrial Average, which returned just 9.7%. According to a copy of the investment manager's year-end letter to Read More


Mnuchin's Remarks On The Payroll Tax Deferral

Treasury Secretary Mnuchin reportedly said in an interview on August 12 that any such deferral will be optional for the employer and not mandatory, it is unclear how to make any such election. The timing and manner of collection of any FICA Withholding Taxes that are deferred and will be due in 2021 (absent further action), including whether an employer will be liable for any such amounts that an employee fails to repay, also need to be confirmed.

Background:

Below, is an executive summary of the items that matter most to businesses, put together by CalCPA:

  1. The due date for the withholding and deposit of employee FICA old-age, survivors and disability insurance taxes (6.2%) on wages paid beginning September 1 and ending on December 31 is postponed until early 2021.
  2. Only FICA taxes on wages below $104,000 annually (or $4,000 per bi-weekly pay period or equivalent for other pay periods) are eligible for the deferral. No pro-rata deferral is permitted if wages are above the threshold.
  3. The wage threshold is determined on each pay period irrespective of any other pay period.
  4. Deferred taxes must be collected ratably by the employer beginning on January 1 through April 30, 2021, and deposited accordingly.
  5. Only the time for withholding the taxes has changed pursuant to the Notice, not the deposit timing rules. However, the deposit timing rules only take effect once the taxes have been withheld.

It is not clear from the published guidance whether this is optional on the part of employers, or whether employees can compel their employer to defer the tax. Similarly unclear is what would happen if an employee terminated before the tax was withheld.

CalCPA has set-up a special COVID-19 FREE Business Resource Center with guides and tools to help small business and the public during this challenging times.

The California Society of Certified Public Accountants (CalCPA) (www.calcpa.org) is the nation’s largest state professional non-profit association representing more than 45,000 certified public accountants (CPA) and has one of the nation’s largest representation of CPA tax professionals.

Previous article Tesla’s $5B Capital Raise; A Wake Up Call for the SEC?
Next article Tilson’s “Spidey Sense Tingles” About Tesla’s Big Move
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

No posts to display