Hey Compliance Warriors!
Over the weekend, President Trump announced he was postponing payroll taxes through the end of the year, extending the unemployment supplement at the rate of $400 a week, helping people stave off eviction, and waiving student loan payments through the end of 2020. The details are not as simple as they might sound. Read on…
The biggest controversy resulting from the order postponing the 6.2% Social Security payroll tax (paid by employees) is that the order does not yet promise complete forgiveness, but a postponement only. Therefore, employers must be cautious in carrying out this “benefit” as it can possibly result in a big problem for employees and employers if legislation to provide forgiveness is not achieved.
“Sec. 4. Tax Forgiveness. The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/
Remember, this deferral is set to begin September 1st and ends December 31st, 2020. We will be watching to see what further guidance might be issued before September 1st. DO NOT START DEFERRING EMPLOYEE PAYROLL TAXES UNTIL WE GET MORE INFORMATION.
Next, the unemployment provision is written to reflect an extra $400/week which is down from $600/week. The $400 would run between August 1st and December 6th, 2020. However, states are required to fund $100 of this while the feds will provide $300. This may be a deal-breaker for some states and there is speculation that this controversy may result in states opting out of the extra payments.
One other hitch in the order is the modification of who is eligible for the supplement. https://www.whitehouse.gov/presidential-actions/memorandum-authorizing-needs-assistance-program-major-disaster-declarations-related-coronavirus-disease-2019/
(d) For purposes of this memorandum, the term “Eligible claimants” means claimants who:
(i) receive, for the week lost wages assistance is sought, at least $100 per week of any of the following benefits:
(A) Unemployment compensation, including Unemployment Compensation for Federal Employees (UCFE) and Unemployment Compensation for Ex‑Service members (UCX), under section 8501 of title 5, United States Code;
(B) Pandemic Emergency Unemployment Compensation (PEUC), under section 2107 of the CARES Act;
(C) Pandemic Unemployment Assistance (PUA), under section 2102 of the CARES Act;
(D) Extended Benefits (EB), under section 3304 of title 26, United States Code;
(E) Short-Time Compensation (STC), under section 3306(v) of title 26, United States Code;
(F) Trade Readjustment Allowance (TRA), under sections 2291 through 2293 of title 19, United States Code; and
(G) Payments under the Self-Employment Assistant (SEA) program, under section 3306(t) of title 26, United States Code; and
You can read all executive orders here https://www.whitehouse.gov/presidential-actions/
Be safe and Be Audit-Secure!