On August 8th, the President issued a memorandum and signed an executive order concerning payroll taxes. This order instructed the Secretary of the Treasury to build a plan to defer the withholding, deposit, and payment of the 6.2% Social Security tax on employees’ wages or compensation, for the period of September 1, 2020, through December 31, 2020. This memorandum applies to employees whose wages or compensation is generally less than $4,000 per bi-weekly pay period, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.” This payment deferral shall be exercised without any penalties, interest, additional amount, or addition to the tax.

Even though the obligation to pay the 6.2% social security tax is delayed with respect to wages paid during September 1, 2020 through December 31, 2020. the Secretary of the Treasury has the discretion regarding how long the delay is, up to one year. The memorandum also directs the Secretary to ”explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” It would appear that such forgiveness would require legislation.

There is no relief with respect to employers’ withholding obligation. So if the delayed taxes are not forgiven and are not paid by the employee, the employer would appear to have liability for the payment of the taxes.

Employers are not required to take advantage of the delay. This issue is not explicitly addressed, but it appears that the employer may decide to continue withholding an amount equal to the deferred taxes. The memorandum does not address what an employer should do if it decides to continue withholding such amounts. Presumably, the Secretary’s implementing guidance will address this.