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By: PayMaster, Inc – 888-717-5577
 
The IRS published Notice 2020-65 last week providing guidance on the delayed OASDI tax option for employees.  The details provided were somewhat vague, but we have learned new details after a conference call with senior members and counsel of the IRS this week.  Based on these details, you may not want to provide this tax deferral benefit.
 
The decision for an employer to offer the tax deferral to its employees is 100% in the hands of the employer.  This means it is optional, even if the employer has an employee demanding to defer their taxes.  The business is the "Affected Taxpayer" per the Notice, not the employee.
A business that decides to offer the tax deferral can make the decision as to whether they want to make it an opt-in or opt-out program.  The employer can also decide the process and any agreement they want to make with their employees for future collection of the balance due.
The amount of Social Security tax that the employee has deferred between September 1, 2020 and December 31, 2020 will be ‘ratably’ due between January 1, 2021 and April 30, 2021.  This means the total deferred amount for 2020 is repaid evenly over each paycheck for the first four months of the year. In essence, the employee will save 6.2% Social Security tax on the last for months of the year, only to pay double (12.4%) on the first four months of the new year. 
If an employee leaves employment prior to the deferred amount being repaid, it remains the employer’s responsibility to make arrangements with the former employee to collect the balance due from them.  It may possible to collect the remaining balance due from the employee’s last check (providing they have enough pay, although this may conflict with the U.S. DOL minimum wage violation and/or State laws.
If the employer fails to collect and remit to the IRS any deferred taxes prior to April 30th, 2021, the employer will be subject to interest and penalties until the balance is paid in full.  This means the employer is responsible for repaying if not able to collect from the employee.
I will also reiterate that it is highly unlikely that the deferred amount will be forgiven.