On August 8 via executive order, President Trump has deferred the employee’s portion of Social Security taxes for many employees and has instructed the Secretary of the Treasury to explore avenues, including legislation, for eliminating the obligation to pay the deferred taxes.
This executive order directs Treasury Secretary Mnuchin to defer withholding, deposit, and payment of the tax imposed by Code Sec. 3101(a) (the 6.2% employee tax that provides for old-age, survivors and disability insurance under the social security tax) and so much of the tax imposed by Code Sec. 3201 (Railroad Retirement Tax) as is attributable to the rate in effect under Code Sec. 3101(a), on wages or compensation, as applicable, paid period of September 1, 2020, through December 31, 2020.
This means that the employee’s share of Social Security tax will be deferred for the prescribed time period.
The deferral is available with respect to any employee, the amount of whose wages or compensation, as applicable, payable during any biweekly pay period generally is less than $4,000, calculated on a pretax basis, or the equivalent amount with respect to other pay periods. The amounts will be deferred without any penalties, interest, additional amount, or addition to the tax.
The order directs Mnuchin to provide guidance to implement the order. It also directs Mnuchin to explore avenues, including legislation, to eliminate the obligation to pay the deferred taxes.
Section 2302 of the Coronavirus, Aid, Relief and Economic Security (CARES) Act already allows employers and self-employed persons to defer their share of Social Security tax through the end of 2020.