The Payroll Tax Cut goes in effect today. As we know from recent history, clarifications of the law tend to come after the enactment date. Here is what we know so far and actions that need to be taken; subject to change.
- This is a temporary payroll tax cut that will last from September 1, 2020 until December 31, 2020.
- During this period, certain employees will not have to pay a payroll tax, which is 6.2% for Social Security.
- The payroll tax cut applies to individual employees who earn less than $4,000, before taxes, during any bi-weekly paycheck period. This equates to $104,000 per year for a salaried employee.
- Employees will not be financially responsible for any penalties or late fees assessed on the amount of the payroll tax that is deferred.
- Employers will be responsible to pay the deferred payroll tax between January 1, 2021 and April 30, 2021.
- Employer and employee participation is voluntary.
- Employees should provide written acknowledgement to their employers that they want to opt in to this program.
If you are using a third party payroll service, alert them, and your accountant, of your decision to participate or not.
Please contact us with any questions.