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About Employee Social Security Withholding Deferral

1. IRS guidance issued to implement Presidential Memorandum deferring certain employee Social Security tax withholding

On August 8, 2020, President Trump issued a Presidential Memorandum directing the Secretary of the Treasury (Secretary) to use his authority pursuant to section 7508A of the Internal Revenue Code (Code) to defer the withholding, deposit, and payment of certain payroll tax obligations.

IRS Guidance:
https://www.irs.gov/pub/irs-drop/n-20-65.pdf

1.1 Applicable Wages
The employee Social Security tax deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period.

The determination of Applicable Wages is made on a pay period by pay period basis starting September 1, 2020, through December 31, 2020.

1.2 Payment of Deferred Applicable Taxes
The IRS released Notice 2021-11 addressing how employers who elected to defer certain employees' taxes can withhold and pay the deferred taxes throughout 2021 instead of just the first four months of the year. Deferred payroll taxes not paid during this period will be subject to interest and penalties.

2. The choice to defer Social Security tax is optional.



3. If your company will defer employee Social Security taxes, please make sure both you and your employees understand:

3.1. This is a deferral of the payroll tax and not an exemption.

3.2. The deferral would only apply to the Social Security portion of employee wages.

3.3. The IRS released Notice 2021-11 addressing how employers who elected to defer certain employees' taxes can withhold and pay the deferred taxes throughout 2021 instead of just the first four months of the year.

3.4. You must collect the deferred Social Security Tax in 2021. Employees may need to sign a contract agreeing to the additional withholding.

3.5. You must plan the possibility that employees leave the company, or employees don't make enough income to pay back the deferred taxes.

3.6. Withholding additional deffered Social Security taxes will result in less net payments for employees in 2021.

4. Who need to update software

If your company will defer employee Social Security taxes in 2020, you need to update ezPaycheck 2020 or ezAccounting 2020 software.

5. How to Update Software

5.1 We have updated both ezPayroll software and ezAccounting software to support the SS deferral.

  • How to update ezPaycheck payroll software

  • How to update ezAccounting software

    • 5.2 New features

  • ezPaycheck 2020: the option to defer employee SS tax.
    • defer SS tax option

  • sample paycheck with deferred employee SS tax
    • paystub with deferred SS tax

  • Deferred SS tax report
    • You can click ezPaycheck left menu "Froms and reports" then "reports" to view report option. Then click "Special Reports" option to view "Deferred Social Security Tax Report". deferred SS tax report

    6. Have a question?

    6.1 For further information regarding the IRS guidance under this notice, please call the Notice 2020-65 Hotline at (202) 317-5436 (not a tollfree number).

    6.2 If you have question about ezPaycheck payroll software or ezAccounting software update, please submit your questions at support page.
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