Should Employers Stop Withholding Employees' Share of Social Security Tax in September?
Social Security Tax

The title’s question is triggered by a Presidential Memorandum issued on August 8, 2020 (the “Memo”) directing the Secretary of the Treasury to defer Social Security taxes for certain employees. As explained below, unless guidance is issued by the Secretary of the Treasury permitting Employers to stop withholding of Social Security taxes from employees’ paychecks, the quick answer to the question is No. 

The Memo directs the Secretary of the Treasury to use his authority to postpone certain tax liability deadlines to defer the withholding, deposit and payment of Employee Social Security tax related to compensation earned by certain employees between September 1, 2020 and December 31, 2020.  The temporary relief from withholding would apply to employees who are generally paid less than $4,000 during any bi-weekly pay period.  The Memo specifically directs the Secretary of the Treasury to issue guidance to implement the Memo. As of August 28, 2020, the Secretary has not issued guidance for implementation of the Memo. 

In addition to the tax deferral, the Memo directs the Secretary of the Treasury to “explore avenues … to eliminate the obligation to pay the taxes deferred pursuant to the implementation of the Memo.”  In the absence of such elimination, all employees benefiting from the Social Security Tax holiday will eventually have the pain of paying the deferred taxes.  The possible obligation to implement extra withholding from employee paychecks in 2021 to repay the taxes deferred in 2020 may be something an employer would rather not do if given a choice.

While Employers may want to confer with their payroll vendor regarding the process that will be used to implement the intent of the Memo, the prudent choice is to not take any affirmative action to stop withholding of Social Security Taxes until the Secretary of the Treasury issues the implementation guidance.

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