How do I defer payroll tax payments?

COVID-19

Important! If your organization will not be deferring Social Security tax, you do not need to make any changes to the Payroll application.

Learn how to set up the Payroll application to defer the employee share of Social Security tax payments. Under the Executive Order "Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster", an employee has the option to defer Social Security tax payments from September 1, 2020 to December 31, 2020.

Note: Social Security tax deferral applies to wages paid September 1, 2020 to December 31, 2020. You are responsible for remitting deferred amounts to the IRS between January 1, 2021 and April 30, 2021 due dates.

Which employees can participate?

Employees making less than $4,000 in a bi-weekly pay period are eligible to defer their portion of Social Security tax if the option to defer is provided by their employer. Employers should consult with their legal department, attorneys, and/or accountants if they have any questions.

The executive order reads, "the deferral shall be made available with respect to any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods." (Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster)

Who is responsible for collecting and paying deferred Social Security tax from employees?

It's the employer's responsibility to collect the deferred Social Security tax and pay it to the IRS by April 30, 2021.

IRS Notice 2020-65 reads, "an Affected Taxpayer must withhold and pay the total Applicable Taxes that the Affected Taxpayer deferred under this notice ratably from wages and compensation paid between January 1, 2021 and April 30, 2021 or interest, penalties, and additions to tax will begin to accrue on May 1, 2021, with respect to any unpaid Applicable Taxes. If necessary, the Affected Taxpayer may make arrangements to otherwise collect the total Applicable Taxes from the employee." ( IRS Notice 2020-65)

Links to additional resources

Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster (whitehouse.gov)
IRS Notice 2020-65. Relief with Respect to Employment Tax Deadlines Applicable to Employees Affected by the Ongoing Coronavirus (COVID-19) Disease 2019 Pandemic (irs.gov)

Most of my employees will defer Social Security tax

Choose this option if most of your employees will defer Social Security tax for the rest of 2020. Using this option will set up the calculation formula, calculation table, calculation, and Social Security pay code for deferring Social Security payments. When you're done, you'll set up employee pay code for Social Security on the employees who choose not to defer Social Security tax