On September 1, 2020, a presidential executive order went into effect allowing employers the option to defer their employee’s Social Security tax through the end of the year, December 31.
This means the 6.2 percent tax that employees normally pay toward Social Security would remain in paychecks through the last check dated in 2020.
This additional money for workers – whose biweekly pay must be less than $4,000 pretax – is intended to stimulate spending and assist with paying bills due to the pandemic. However, without additional legislation from Congress that would allow forgiveness of the deferred tax, the IRS states employers who choose deferral will be responsible for paying the tax in full to the federal government on or before April 30, 2021.
The deferral also means workers will have to pay twice the amount in Social Security next year to make up for the money waived because of the “holiday”.
The paychecks of federal workers, including the military, are not exempt from this directive and will automatically be enrolled in the payroll tax deferral. Other private businesses and public companies have a choice to opt out of the withholding.
For more information, contact your IPS representative and visit the IRS website.