The COVID-19 crisis has placed many businesses and their employees in difficult financial situations. Some businesses have had to close or limit their hours of operation, and many employees have been laid off or had their work hours reduced. While some government relief programs have provided aid to those who have been affected by these issues, many people are continuing to experience financial difficulties. A recent executive order may provide some help in this area by allowing employers to defer some of the taxes withheld from employees’ pay.
Social Security Tax Deferral
In August of 2020, President Trump issued an executive order that allows for the deferral of the 6.2% tax employees pay toward Social Security. This deferral will be allowed for wages earned between September 1 and December 31, 2020. To qualify for deferral, an employee must earn less than $4,000 in pre-tax income in a bi-weekly pay period.
While these payroll taxes may be deferred, this order does not provide for the forgiveness of any taxes owed. Deferred taxes will be collected between January 1 and April 30, 2021. During the deferral period, employees will receive a temporary boost in their take-home pay, but they will then see reduced paychecks in 2021 due to the deferred taxes being withheld from their pay along with all other applicable taxes.
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