SCACPA and the AICPA are offering resource concerning the recent Executive Action on Payroll Tax Deferral.

The executive action has raised many questions, and specific guidance and clarity are being requested from the Treasury and the IRS.

The AICPA submitted a comment letter to Treasury and the IRS, requesting additional guidance and clarification and providing specific recommendations. Concerns precipitated by President Donald Trump’s memorandum include:

  • Guidance stating that the deferral is voluntary and that an “eligible employee” is responsible for making an affirmative election to defer the payroll taxes
  • Guidance stating that an “eligible employee” is an employee whose wages are less than $4,000 per bi-weekly pay period
  • Guidance stating that the $4,000 limit should apply separately to each employer of an employee
  • Guidance stating a payment due date(s) for the deferred taxes and a mechanism for employees to pay the deferred taxes

A subsequent announcement by Treasury Secretary Steven Mnuchin indicated that the payroll tax deferral would not be mandatory for employers to implement, which drew this response from AICPA Vice President of Taxation, Edward Karl, CPA, CGMA.

“Since the taxes being discussed are those ‘imposed on the income of each employee,’ a big question we have is whether or not employees will have the option to opt in or out of the program,” Karl said. “Employees should make the deferral decision and should also be responsible for repayment. However, there are certain questions that need to be considered that taxpayers and businesses need guidance on. For example, what if an employee works more than one job? What if the company goes out of business? What if the employee changes jobs? Employers still have to figure out how to implement this policy, but right now, there are too many unknowns.”

The AICPA has posted a 4-minute video on the executive action Ed Karl with further comments.

Further headlines:

Accounting Today (Aug. 18, 2020): “Business groups warn of ‘substantial tax liability’ from payroll tax deferral”

Forbes (Aug 18, 2020): “30 U.S. Business Associations Call Trump’s Executive Order Deferring Payroll Tax Obligations ‘Unworkable’”

Journal of Accountancy (Aug. 13, 2020): “AICPA requests guidance on payroll tax deferral”