Updated: Sep 1, 2020
We wanted to provide a few details relating to the payroll tax Executive Order this weekend. There is still ambiguity around specifics and forgiveness of these payroll taxes.
President Trump signed an executive order allowing businesses to suspend the employee portion of FICA taxes (Social Security & Medicare) from Sept 1- Dec 31 for workers generally making under $4,000 per month or $100,000 per year. This means that you as the employer would not be required to withhold these tax amounts from eligible employees during this period thus resulting in a larger net pay check for them.
The order itself is a deferment of these payroll taxes meaning as the order stands the taxes are not forgiven but suspended to become due at a later date. While a promise of forgiveness has been made if he’s re-elected he’d also need congressional approval in order to forgive the taxes deferred. Congressional approval could also be dependent on the upcoming congressional elections.
We will update as we hear further guidance related to this, but it’s important to note as the employer there is not a guarantee currently these taxes will be forgiven if they are deferred. The order is optional where employers can select to suspend payroll taxes or continue to withhold them. We expect Gusto and other payroll providers to have updated guidance soon. We will update as we learn more information.