Additional information was included in IRS notice 2020-65 https://www.irs.gov/forms-pubs/form-w-2-reporting-of-employee-social-security-tax-deferred-under-notice-2020-65 associated with reporting deferred employee social security on form W-2.

When processing W-2s in Aatrix, warnings will be returned associated with the employees who have deferred Social Security withholding as shown below. Verify these employees have elected to defer Social Security withholding and that the amounts reported are accurate before filing your W-2s. Once you have verified the withholding amounts are correct, select the [Continue without Correcting] button to proceed with processing of the W2s

The Treasury Department has issued its official guidance on the 2020 payroll tax relief that President Trump put into action on August 8 in his Presidential Memorandum. To read the full order, click here. According to IRS Notice 2020-65, payroll tax relief is available for taxpayers/employees and is applicable to wages paid from September 1, 2020, through December 31, 2020. The full guidance for the notice can be found here.

Employers are allowed to defer withholding, deposit, and payment of the employee's portion of Social Security tax on wages that are less than $4,000 during a bi-weekly pay period. Each pay period is to be considered separately, and no deferral is allowed for any payment to an employee of taxable wages of $4,000 or more for a bi-weekly pay period. Technically the requirement to deposit employee Social Security tax does not occur until the tax is withheld; thus, by postponing the withholding of the employee Social Securit y tax, the deposit obligation is delayed.

Important note: A change was made to the original setup document attached associated with the formula named "PR_SOC" on 09-18-2020. If you set this up previously you may need to edit this formula in order to calculate the deferred SOC tax amounts correctly.

Before you decide to defer payroll taxes, we recommend talking with talking with your CPA or financial advisor. If you choose to defer payroll taxes, here are some ways you may protect yourself and your employees when implementing the deferral:

• Ensure your employees understand that the deferred Social Security taxes must be paid back between January 1 and April 30, 2021. Note: This amount may be paid back by withholding twice the normal amount between January 1 and April 30, 2021 or by any other means your organization decides.
• If an employee elects to defer withholding of Social Security and later decides to resume withholding before the end of the allowed deferral period, Payroll will attempt to self adjust the amount of the Social Security in order to withhold the correct YTD amount.
• Have a repayment plan in place for all circumstances, including wage or personnel changes.
• Remember to change employees setup for withholding employee social security to normal withholding, uncheck the Deferred SOC check box on the setup of the employee, and turn off the automatic DEFSOC Fringe on the Setup of the Employee Fringe before processing the first payroll of 2021.

Note: Sage is aware that the IRS posted a draft revision of Form 941 to include changes for any deferred payroll tax amounts. We are reviewing the draft, which is posted at https://www.irs.gov/pub/irs-dft/f941--dft.pdf.

As we become aware of additional changes, this article will be updated.

An attached Word doc and report are available below. The Word doc walks through the suggested setup for implementing this Executive Order. As there may be accounting and legal considerations please check with the applicable professionals.

A report has been provided to you which is linked to this article. If you have followed the recommendations provided in this document, you will be able to report on the Deferred Social security tax for your employee as well as the amount recorded for the Deferred Fringe. The Deferred Fringe will keep a running total of the Deferred Social Security withholding tax for each employee and this Fringe can be added to the Check format so that the employee can also view the amount of the Deferred Taxes. Additionally, the report has two columns for 2021 reporting. One column shows the amount of the prior year Deferred Social Security fringe, and the other column will show the amount of the Deferral Deduction which the employee would have deducted in 2021.