There has been recent discussion concerning payroll tax deferrals, but it’s possible that neither you nor your employees fully understand what this entails. We know it can be overwhelming to sift through all the available data, but we’re here to assist you. Find out how to navigate the 2022 tax law changes with the help of certified business valuation services.
To begin, we’ll define two seemingly comparable programs: payroll tax deferral for companies and payroll tax deferral for employees.
Employee tax withholding and calculating
The March 2020 CARES Act included a provision allowing businesses to delay their share of payroll taxes, including contributions to Social Security and Medicare. Discover more about the payroll tax postponement provided by the CARES Act.
For employees to be able to delay their share of Social Security contributions, payroll tax instructions issued just recently must be followed. You may have also heard this deferral referred to as the 2020 tax vacation or as an executive order deferring payroll taxes (actually, it was a presidential memorandum). In this post, I’d want to talk about that very thing.
Remember that a “tax vacation” usually means a reduction or elimination of taxes, not a postponement of taxes meant to be reimbursed later.
While we wait for the Treasury to issue further clarification, here are some of the most pressing concerns regarding the current state of information on the payroll tax deferral and what we do and do not know.
How to delay income taxes through payroll
Owners of businesses interested in joining must consider a variety of things before deciding what is best for their company and their employees. This article is not meant to encourage or discourage companies from participating in this program; rather, it is meant to provide additional information on the Treasury guideline (IRS Notice 2020-65).
Frequently Asked Questions about the IRS’s Payroll Tax Deferral Program
This document is intended to answer frequently asked issues about the August 2020 presidential memorandum’s suspension of payroll taxes.
Payroll tax deferral: is it available to all workers? In what ways might I identify eligible workers?
Unfortunately, not all workers will qualify to defer payroll taxes due to the minimum wage criterion. An employee may be eligible for benefits one pay period but not the next.
