It is always “fun” and “interesting” when I run across a new scam / virus…
FICA (Social Security) Tax Deferral
Today is the first day you can offer your employees a FICA (Social Security, 6.2% of wages) tax deferral. Please note, this is a deferral, not an exemption. The tax will still have to be paid unless a law is passed to specifically forgive the tax obligation. Gambling on the outcome of possible legislation is strongly not encouraged.
Because exemption is not currently approved the question arises of how the tax will eventually be paid. I made the foolish assumption that when the rules were announced that the employee would be responsible to pay the tax. I WAS WRONG!!!
I am quoting Grant Thornton now:
“The employer itself remains liable for the deferred withholding if it cannot recover those amounts from employees.”
Did I just hear brakes screeching and tires squalling to a panic stop?
Yup, the employer has to pay the tax even if the employer can’t recover it from the employee in the first 4 months of next year. For example, an employee quits, dies, is terminated, is laid off, or their wages are cut to the point that the tax can’t be recovered.
Congratulations, you just gave the person you fired a free bonus, plus you will have to withhold and pay more tax to cover the tax on the gift / bonus.
The article I just read details many other concerns and if you would like to read the article for yourself here’s the link.
So I strongly suggest you not offer the tax deferral of FICA as it currently is structured. Unless you just like giving away money, in which case, please mail your check payable to my address below.
There’s more about pandemic assistance and other timely business topics elsewhere in my blog. Read about preserving cash during a crisis and new state funds available for New Mexico businesses affected by the Covid-19 pandemic lockdowns here.