IRS Payroll Tax Deferral Starts Today; Will It Defund Social Security?

 

It took 20 days from President Trump signing an executive memorandum to defer certain payroll tax obligations for Treasury Secretary Mnuchin to issue Notice 2020-65 and provide guidance to employers on the how to execute the payroll tax holiday. Treasury’s guidance also came just two business days before the deferral period was set to start on September 1, leaving absurdly little time for employers to potentially reconfigure payroll systems and implement the change.

To add insult to injury, the guidance itself wasn’t attractive. It clarified that the short deferral of the tax was not an elimination of the tax and would leave employers on the hook for repaying the tax in early 2021. It also articulated that the deferral would only be for a few short months, which would likely reduce employee wages in 2021 as companies double employees payroll taxes. The net result is that the odds of many employers participating is low, which should be music to the ears of those worried about Trump’s initiative defunding Social Security. Simply put, it is highly unlikely that the payroll tax deferral will impact the Social Security trust fund.

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