Marietta College Staff and Faculty,
On August 8, 2020, President Trump signed an executive memorandum directing the U.S. Department of the Treasury to defer certain payroll tax obligations amid the ongoing COVID-19 pandemic. On August 28, 2020, the Treasury and IRS issued further guidance to employers on how to implement this payroll tax deferral.
It appears that this deferral is optional by employers. The payroll tax deferral involves stopping the withholding of employee social security tax (6.2%) on wages for employees that earn up to $104,000 annually for payrolls including September 1, 2020 through December 31, 2020. At this point, this is only a deferral. It is not a forgiven amount. Therefore, it would have to be paid back in January through April of 2021.
Based on all the information and advice we have on the deferral and because it will not be forgiven, Marietta College has decided to not participate in this payroll tax deferral.
Here is an example of how it would work based on the most recent guidance:
“If you are an employee earning $50,000 annually and you are paid on a monthly basis, the 6.2% of employee social security tax would not be withheld. This would equate to $258.33 per month in more take home pay. So, for September through December of 2020, you would receive a total of $1,033.32 more in take-home pay. Starting January 1, 2021, your employee social security tax withholding begins again. The $258.33 that would be coming out for your pay in January would happen, as well as, another $258.33 for the monthly deferred amount from 2020. Your take-home pay would decrease by $516.66 per month through April of 2021 as compared to your take-home pay during September through December 2020.”
This example should show that although it appears to be advantageous up front, and because it is not forgiven, it becomes a disadvantage after the first of the year.
Please contact Michele Marra at mm011@marietta.edu or Debbie Wayland at dce001@marietta.edu with any questions on this topic.
Bring Forth a Pioneer,
Bill Ruud
President and Professor of Management