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1 1 (January 6, 2021)

handle is hein.crs/govebdh0001 and id is 1 raw text is: Congressional * Research Service COVID-19: Presidential Order Deferring Individual Payroll Taxes Updated January 6, 2021 On August 8, 2020, President Trump issued a presidential memorandum ordering the deferral of individual payroll tax obligations from September 1, 2020, through December 31, 2020. The deferral was for employees with biweekly compensation of generally less than $4,000. The memorandum directed the Secretary of the Treasury to issue guidance to implement this policy. On August 28, 2020, guidance was provided in IRS Notice 2020-65. This Insight discusses the individual payroll tax deferral outlined in the memorandum, including issues related to repayment of deferred amounts; compares this order to the business payroll tax deferral provided in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136); and addresses questions related to potential economic effects. What individual payroll taxes were affected by the order? The presidential memorandum ordered deferred collection and payments of the employee portion of the Old Age, Survivors, and Disability Insurance (OASDI) payroll tax, also known as the Social Security payroll tax. The Social Security trust funds are financed by a 12.4% payroll tax on wages up to the taxable earnings base ($137,700 in 2020). The tax is split equally between employers and employees, with each paying 6.2%. Self-employed individuals pay both the employer and the employee share, or 12.4%. The deferral was applicable to employees with less than $4,000 in wages during the biweekly pay period (or equivalent amounts with respect to other pay periods). The deferral applied to the railroad retirement tax attributable to the individual Social Security tax. The memorandum and IRS Notice 2020- 65 did not specify whether the deferral applies to self-employed individuals. How did the order affect payroll tax collections? Employers collect the employee portion of the tax by deducting the tax from wages when wages are paid. Employers typically deposit payroll taxes with the Internal Revenue Service (IRS) semiweekly or monthly, and report employment taxes paid on quarterly federal tax returns filed no later than 30 days Congressional Research Service https://crsreports.congress.gov IN11488 CRS INSIGHT Prepared for Membersand Committeesof Congress

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