IRS Releases Guidance for Payroll Tax Deferral Executive Order

Thursday, September 3, 2020
Michael Bivona

The IRS has released Notice 2020-65, which details the procedures by which employers and employees may benefit from President Trump’s Executive Order regarding payroll tax deferral (released earlier this year). Details surrounding that executive order can be found HERE.


The Notice makes clear that wages subject to payroll tax deferral include wages paid between September 1, 2020 and December 31, 2020 IF those wages are less than $4,000 per bi-weekly pay period. Determination of eligibility for payroll tax deferral is made on a pay-period by pay-period basis and employees with variable hours may be eligible some weeks and ineligible others.


The Notice also makes clear that the withholding deferral ends on December 30, 2020 and that regular payroll procedures resume beginning on the period of January 1, 2021-April  30, 2021. During this period, deferred payroll taxes become due and the employer must make the required payments or suffer late fees, interest, and other penalties beginning on May 1, 2021. This Notice empowers employers to collect any necessary taxes from employees through an increase in payroll taxes for the period of January 1, 2021-April  30, 2021.


Employers must begin making arrangements to accommodate this temporary rule change. Employers should keep exact measurements of the amount of payroll taxes that have been deferred for each employee. Employers should also put in place a temporary policy to retrieve deferred payroll taxes should an employee leave the company before repayment begins on January 1.