On August 8, 2020, an executive action the US president Donald Trump issues on deferral of payroll taxes could put more money in your pocket. How the order will be implemented is still unknown, but you need to keep a few things in mind before making plans for that extra cash.
In this press release, we have explained a few such things, take a look at them. But let's know about "what payroll taxes may be deferred first.
What payroll taxes can be deferred?
You can defer the withholding, deposit and payment of the employer portion of the old age, disability and survivors insurance segment of the FICA taxes . For example- the 6.2 percent tax on employee wages/salaries imposed by section 3101 (a) of the internal revenue code and the equivalent amount under the RRTA imposed by section 3201 (a). Also, the deferral applied to taxes on salaries and wages paid from September 1, 2020, through December 31, 2020.
5 things you must know about payroll tax deferral
Remember Deferred taxes will be withheld in even amounts next year
When your employer recoups the deferral next year say 2021, then you will see the amount deducted evenly from Jan 1 to April 30, 2021. But, employers and payroll providers are still hashing out what could happen to seasonal employees who leave before the deferral being repaid. If any employee change his or her job, his or her employer may withhold the full amount deferred from the last check of the employee'.
This can be a substantial amount.
Deferral is not mandatory
If an employer does not opt into deferral, then it would be prudent for the employer to think about communicating with his or her workers why the employer has picked up not going to defer. For instance- disruption of processes, cost of modifying computer programs for a short period of time and risk of mistakes from changing procedures.
The referral taxes are due eventually
Keep in mind that these are deferral taxes, not forgiveness of taxes. Thus, all those taxes must be owed at the end of the deferral time unless congress changes the low to say that they are forgiven. So, must keep this in mind.
What is the payment of the deferred taxes
As an employer, you should ratably withhold and pay from salaries or wages or even compensation paid between Jan 1, 2021 and April 30, 2021, the full applicable taxes that you deferred under this notice. If not, then penalties and huge interest or even additions to tax will start to accrue on May 1 with respect to any unpaid taxes. If required, then you can make arrangements to collect the applicable taxes from your employee.
Who is eligible for deferral determined?
The deferral is available only to those employees or workers whose pretax wages/salaries or compensation is less than $4,000 biweekly that works out to around 1 lac dollar a year. It is not available for those people who are self-employed. White House economic adviser Larry Kudlow told reporters Friday he thinks the deferral will be "extremely helpful," and the administration is pushing for the deferred taxes to be forgiven.
Remember, the period of the payroll tax deferral begins on Sep 1, 2020, and runs through Dec 31, 2020. However, this is subject to defined conditional limits. Due to the relief is on the employees or workers side, if the payroll deferral provision is implemented, then employees ( who are eligible for this deferral) will see larger paychecks in the month of September. Businesses and organizations that have an interest in participating can not be able to so quickly as it can take some time to update their payroll systems.
To know more, you can contact to Access Financial. Global contract management company in the UK, Switzerland and other 60+ countries.
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