The White House announced a new series of executive orders providing relief to employers and taxpayers through deferrals of payroll taxes. The President issued an executive order granting additional student loan relief and provide a payroll tax cut, enhanced unemployment benefits and an eviction moratorium. Some of the Executive Order's key aspects are as follows:
The payroll tax refers to the Federal Insurance Contributions Act ("FICA") comprised of Social Security and Medicare. Payroll tax is deducted from taxpayer's paychecks to cover those two social programs. For Social Security, taxpayers pay 6.2% of earnings up to what is known as the Social Security wage base. The Social Security wage base is $137,700 for 2020. If you earned $100,000 in 2020, you would pay $6,200 into Social Security. For Medicare, you pay 1.45% of your earnings but there is no limit. If you earned $100,000 in 2020, you would pay $1,450 into Medicare.
The President signed an executive memorandum, titled the “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster,” that will give a payroll tax holiday to employees earning less than $104,000 per year from September 1 through December 31, 2020.
The President said that he would direct the Treasury Department to allow employers to “defer” the payment of payroll taxes and then direct the Secretary of the Treasury to “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.”
If you are unsure of the ramifications of the payroll tax deferrals, please contact the Tax Attorneys at Fazzio Law, we are in your corner!
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