IRS Issues Guidance Implementing Payroll Tax Relief

The IRS has issued Notice 2020-65, guidance implementing President Trump’s Aug. 8 Presidential Memorandum directing the Secretary of the Treasury to defer the withholding, deposit and payment of certain payroll tax obligations under Internal Revenue Code Section 7508A. 

The Treasury Secretary has determined that employers which are required to withhold and pay the employee share of Social Security tax under Code Section 3102(a) or the Railroad Retirement tax equivalent under Code Section 3202(a) are affected by the COVID-19 emergency for purposes of the relief described in the memorandum. 
For affected taxpayers, the due date for the withholding and payment of the tax imposed by Section 3101(a), and so much of the tax imposed by Code Section 3201 is postponed until the period beginning on Jan. 1, 2021 and ending on April 30, 2021. 

Notice 2020-65 applies to wages as defined by Section 3121(a) or compensation as defined in Section 3231(e) paid to an employee on a pay date during the period beginning on Sept. 1, 2020, and ending on Dec. 31, 2020, but only if the amount paid for a biweekly pay period is less than the threshold amount of $4,000, or the equivalent threshold amount regarding other pay periods. The determination of applicable wages is made on a pay-period-by-pay-period basis. 

When the Relief Applies

If the amount of wages or compensation payable to an employee for a pay period is less than the threshold amount, the relief provided in the notice applies for that pay period, regardless of the amount of wages or compensation paid to the employee for other pay periods.

An affected taxpayer must withhold and pay the total applicable taxes that the affected taxpayer deferred under Notice 2020-65 ratably from wages and compensation paid between Jan. 1, 2021 and April 30, 2021. If an affected taxpayer does not do so, then interest, penalties and additions to tax will begin to accrue on May 1, 2021, regarding any unpaid applicable taxes. Affected taxpayers may make arrangements to otherwise collect the total applicable taxes from the employee if necessary.