Based on the guidance currently available, the deferral of withholding of Social Security taxes from eligible wages appears to be optional for employers. Current guidance does not specifically mandate that withholding of Social Security tax must stop for the period September 1 through December 31, 2020, and Secretary Mnuchin has publicly stated that employers cannot be forced to participate in the deferral program.
Absent further action from Congress, pursuant to the Treasury Notice, employers will remain liable for any deferred employee Social Security taxes, regardless of whether they are able to fully withhold such deferred taxes from employees from January 1, 2021 through April 30, 2021, or otherwise able to fully collect such deferred taxes from employees.
The Treasure Notice does not provide clear guidance on whether employers choosing to offer the deferral must offer their employees the option to defer or not. Employees also may prefer not to defer because they may be concerned with owing a large amount that would be withheld in early 2021, in addition to the “normal” 2021 employee Social Security tax.
ADP strongly recommends that clients consult with their legal counsel and tax advisors regarding whether to offer the deferral to their employees, and whether to allow employees to defer Social Security taxes pursuant to the Presidential Memorandum. For further information on the potential implications to you if you choose to defer, please view the FAQs below.