Payroll Tax Holiday Information

I’m getting a lot of questions about this, so I thought that I would take some time to explain some of the basics on this Executive Order.
It is now possible to defer the employee portion of Social Security Taxes from September 1, 2020, until the beginning of next year. This only refers to Social Security Taxes. Medicare taxes must still be collected and remitted as always.
Also, this only refers to the employee portion of Social Security Taxes. If you remember, this tax is a total of 12.4% which is split equally between the employee and the employer. The business portion must still be paid timely with your 941. The employee portion can now be deferred. Please notice how I said defer. This is not a forgiveness of the tax. You still have to pay it.
There are two things about this order that are troubling.
1 – This is only on the employee portion or 6.2% of the Social Security Tax. So let’s say that you do this. Let’s say that you decide to not withhold the employee portion of the tax from now until the end of the year. Your employees end up with larger checks, which is the whole point of this order. They want to put more money into the economy.
But then, let’s say that they leave you or you fire them in December for whatever reason. You aren’t off the hook. You then must repay their portion of the payroll taxes that weren’t withheld. The government has to be made whole, only this time it is at your expense rather than your employee’s. They’re gone. How are you going to collect from them?
2 – The unpaid payroll taxes must be repaid by April 30th of next year. If they are not paid by then, interest and penalties will be assessed.
Let’s set up another scenario. You decide to participate in this thing, only your business goes to hell in a hand basket right after the holidays. You had every intention of paying back the taxes, but your checking account is now empty.
Only whatever God you pray to has any idea what is going to happen next week, let alone next year. In these troubling times, it could happen.
Let’s also realize that this is voluntary. No one is twisting your arm, telling you that you have to do this.
Is this too risky given the potential benefits? I would say yes, and suggest that you do not participate, especially since I don’t see how there are any benefits to your business in the first place. The only thing that it will possibly do is to piss off your employees if they are still with you next year when they get a smaller paycheck.
Do the Nancy Reagan, just say no.
Let me leave you with this one thought…
What I had sadly predicted seems to be happening. It seems like we are going to be in the extended holding pattern of Phase Four for the foreseeable future. Unless you are seeing something that I am missing, this is it sports fans. What you see is what you get.
If you have not already put a solid plan in place, you need to get one in place now. Congress is making noise about passing another stimulus package, but at this point more is said than done. It doesn’t look like one side is going to allow the other side to do anything before the election.
I can’t see how they will forgive the PPP Loans under $150K with all of the fraud that has been uncovered. Voting for that would be political suicide. I can’t see how they will be able to vote for another round of PPP Loan Funding for the same reason.
Are they going to send out another round of stimulus checks? Probably not. They are scoring too many political points by blaming the other side for their inactivity.
Will our current administration at the local level do anything to protect our businesses from looters? If they haven’t done anything substantial so far, why would they start now?
Will they do anything to open things back up, before a cure or a vaccine is found? Probably not. They seem to be sticking to their guns.
Will anything major change between now and next year? I certainly hope so, but sadly, I doubt it.
You need to do whatever is necessary to get through this thing. Plan your work and work your plan. But do it knowing that we are here to help.
We’re right there in the foxhole next to you. Let’s shoulder our weapons and get it done.
Accounting Solutions Ltd. stands ready to complete our mission and purpose. If there is anything that you need, whether you are a current client or not, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
Accounting Solutions Ltd.
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