On September 3, the IRS confirmed the Employee Social SecurityTax Deferral is optional therefore employers are not obligated to participate in the deferral. Overwhelming feedback from our users indicates that most employers do not plan to participate. For those employers, no action is required to opt-out.
With the delayed IRS guidance issued on August 28 only days before the September 1 effective date, the time window to implement support of the payroll tax deferral is understandably a challenge. In Scissortail HCM (aka Workforce Ready), support of the deferral will be available in early October.Once available, employers will have the ability to opt-in for the individual employees who wish to defer the SS tax through December 31, 2020. Please keep in mind they must be under the wage threshold to defer the tax. Unfortunately, due to the technical changes required and the need for third party tax processes to also support the changes, a solution to defer will not be available for September payrolls.
Employees should understand the deferral is not tax forgiveness, but rather temporary relief. Employees will be responsible for repayment of the taxes from January 1 to April 30, 2021 resulting in reduced paychecks during the repayment period.
If an employer is unable to collect the deferred taxes from their employees, the employer is ultimately responsible for repayment.
Employers should evaluate the option to offer the deferral to their employees, including clear communication of the decision and impacts to employees and as always, consult their tax and legal resources regarding government compliance matters.