Coronavirus Resources for Small Businesses
Under an Executive Order signed last month by the President, employers can defer collecting the employees’ share of Social Security taxes (6.2%) from their employees’ paychecks from September 1st through the end of the year.
This is not an elimination of the payroll tax – employers must repay the tax in early 2021. And it is completely optional for businesses. It appears that employers can stop collecting the 6.2% payroll tax from employees through the end of the year, but they must withhold double from employee paychecks for the first 4 months of 2021. And if the employer cannot collect double taxes from the employee next year, the employer bears the responsibility of paying the deferred taxes.
While the payroll tax deferral might provide a slightly bigger paycheck to some employees, it could create a significant hardship in 2021 when those employees get double tax withheld from their paychecks.
Due to the difficulty of implementing this payroll tax deferral and the burden of assuming the responsibility of paying back deferred taxes, most businesses are opting out of participating in this payroll tax deferral.
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