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MAT Staff September 2, 2020

Presidential Executive Order Deferring Payroll Tax Obligations

On August 8th, President Trump issued an executive order in response to the COVID-19 pandemic. The order states that starting September 1st,  a deferral of the 6.2% social security tax obligation “shall be made available to any employee … whose wages or compensation … during any bi-weekly pay period generally is less than $4,000” through December 31st, 2020. The deferral is a temporary relief from paying the tax, but under current law, the employee must eventually pay the deferred tax obligation. The order discusses the possibility of the federal government forgiving the tax, but that would require an act of Congress and amounts to speculation or hope on the part of the President.

The Department of Treasury guidance on the tax deferral indicates the deferred tax must be paid back by April 30th, 2021. Townships must offer their employees the option to defer the social security tax obligation, but the town should inform the employee that under current law the township must collect double the amount of social security tax withheld between January 1st, 2021, to April 30th, 2021, to pay back the deferment.

Using the median household income in the U.S. ($64,000 gross income), over the deferment period, this would defer $1,220 of tax or $152 per pay period until December 31, 2020.

The text for the executive order can be found here.

The text of guidance from the Department of Treasury can be found here.

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