• COVID-19 Update—Temporary Tax Relief (Aug. 8 Executive Order)

COVID-19 Update—Temporary Tax Relief (Aug. 8 Executive Order)

The following summary of recent government activity is a collaboration from Wespath and the General Council on Finance and Administration (GCFA).

On August 8, 2020, President Donald Trump prepared a memorandum directing the Secretary of the Treasury to defer due dates under the tax code to provide “temporary relief … to support working Americans.” [The Secretary of the Treasury has authority in the case of certain disasters (such as the crisis declared for the COVID-19 pandemic) to postpone certain due dates under the tax code.]

Specifically, the President directed the Secretary to defer the dates for payment of the employee portion of payroll (Social Security and Medicare) taxes for the period September 1, 2020 to December 31, 2020, at least for employees making less than $4,000 (gross) every two weeks. These taxes are normally paid by means of employers withholding and depositing with the Treasury the amount of such taxes: 6.2% for Social Security and 1.45% for Medicare. The President also directed the Secretary of the Treasury to issue guidance to explain how this would work.

What this means:

Until the Secretary of Treasury takes action pursuant to the Memorandum and issues guidance, it is difficult to know what impact the Memorandum will have. The Memorandum leaves several details unresolved, including: new due date for these taxes, and whether employers or employees will have the option of declining the deferral option. (For example, earlier this year, the Secretary of Treasury used this same authority to postpone the April 15, 2020 due date for filing tax returns and making tax payments, to July 15, 2020, but this did not require taxpayers to take advantage of the postponed due date. See IRS Notice 2020-18.)

We continue to monitor legislative activities and will bring you updates as they become available.

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