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5 Things to Know About the Payroll Tax Holiday

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August 17, 2020 | Barbara Baksa

5 Things to Know About the Payroll Tax Holiday

President Trump has issued an executive order establishing a payroll tax holiday. I have a lot of questions about what this might mean for stock plan transactions and I’m guessing that you do too, so I checked in with Deborah Walker of Cherry Bekaert and Stephen LaGarde of EY, who will be moderating the panel “The IRS and Treasury Speak” at this year’s NASPP Conference.

1. Who? What? When?

The order instructs the Treasury Department to allow companies to defer the withholding of Social Security tax from September 1 through the end of this year for employees who “generally” earn less than $4,000 per biweekly pay period.

2. This Is Not a Get Out of Tax Free Card

This is only a deferral; employees will have to pay the deferred amounts eventually. Trump has said that he hopes Congress forgives the taxes, so that employees won’t have to pay them. Presidents don’t have the authority to eliminate taxes; this can only happen through Congressional action.

3. Don’t Do Anything Yet

Both Deborah and Stephen emphasized that companies must continue to withhold Social Security until Treasury issues guidance implementing the order. Moreover, neither was confident that companies would want to take advantage of the order. Stephen noted:

Once the IRS/Treasury take action I think the main question will be whether, rather than how, an employer should go along with this.

4. So Many Questions

There are many questions that we don’t have answers to yet, here are just a few:
  • Which wages are included for purposes of determining if an employee has exceeded the $4,000 bi-weekly threshold?
  • How is the income from stock plan transactions counted for purposes of the $4,000 bi-weekly threshold?
  • What happens if a stock plan transaction causes an employee to exceed the $4,000 threshold for one bi-weekly pay period and the employee’s wages are less than $4,000 in the next bi-weekly period?
  • How will employees pay the taxes back?

5. Find out more at the NASPP Conference.

I hope to get answers to some of these questions, if not all of them, at the upcoming NASPP Conference. Deborah and Stephen will discuss the payroll tax holiday with representatives from both the IRS and Treasury during the session “The IRS and Treasury Speak” at the 28th Annual NASPP Conference. Don’t miss it!
Register for the Conference today!

- Barbara

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