You may have heard of the federal plan to allow employers to offer their employees the option of deferring their payroll taxes to ease financial hardship due to Covid-19. The city has decided not to allow employees this option. Their explanation is included in the memo copied below. Let me know if you have any questions:
Department Directors,
As discussed at Staff this morning, President Trump has signed an executive order instituting a payroll tax deferral program which is set to kick in today, September 1. (IRS Notice 2020-65). This allows employers to defer the withholding, deposit, and payment of the employee portion of the Old Age, Survivors, and Disability Insurance segment of the FICA taxes. This deferral applies to taxes on wages from September 1 – December 31, 2020. Payroll taxes are deferred and not forgiven. This means that on January 1, 2021 the employer will begin collecting the deferred taxes, with all deferred taxes collected by April 30, 2021.
Employers are not required to defer payroll taxes. Informal polling in the metro shows that most cities will not be offering this deferral. This is partially related to the fact that for most of us, we have not furloughed employees, or reduced hours for the majority of our employees. This program also presents payroll processing difficulties, and an unclear process for collecting the deferred taxes from employees who may leave employment prior to the end of the program.
Taxes are collected based on employee wages, so it varies for each of us. A baseline of what this would be are roughly $71 per pay period for those earning $30,000. (That would mean that in January, we would begin withholding approximate $142 from each check in that same example.) You can multiply that out for different earners. The threshold for eligibility is earning less than $4000 every two weeks.
We have determined that we will not be offering the payroll tax deferral for the reasons outlined above.
Please let me know if you have questions. (I’m happy to speak with employees who have concerns as well.)
Cyndee Rhames