Executive Memorandum on Employee Social Security Tax Deferral

This page is provided for informational purposes only and may not capture all scenarios applicable to you.

As your PEO, AdvanStaff HR will continue to neutrally support programs administratively as each employer assumes a different propensity of risk for business decisions. The choice to participate in any optional program is up to the worksite employer.

AdvanStaff HR is often asked for opinions and guidance on programs such as the Executive Order Tax Deferral Program. Based on the current elements of the program, and as currently written, we do NOT encourage employers to allow employees to defer the next three months of social security taxes until Jan, 2021. The program places a significant burden and risk to the employer to encourage, facilitate, and guarantee a short term tax LOAN to employees. Tax liability forgiveness is NOT a part of this program at this time and many employees will find it very difficult to repay taxes in 2021.

Of course, there is the small chance that the parties to this deal will find a way to “forgive” the tax deferrals. If that happens, employees will be very unhappy if they did not have the option to defer and benefit from tax forgiveness. There is no knowing how that will shake out at this point, but it is something to consider.

All employers are encouraged to seek guidance from their dedicated tax professionals, attorneys, and other trusted advisors for direction relevant to their own particular situation.


On August 8, 2020, President Trump issued an Executive Memorandum allowing employees who make less than $104,000 a year to defer their payroll taxes starting September 1 through the end of 2020.

Details of President Trump’s Tax Deferral Program:

  • The tax deferral is limited to the 6.2% employee portion of the social security payroll tax.
  • The tax deferral applies to wages PAID during the period of September 1, 2020 – December 31, 2020 that are generally less than the following amounts on a pre-tax (gross) basis:
    • weekly: $2,000
    • bi-weekly: $4,000
    • semi-monthly: $4,333
    • monthly: $8,666

      NOTE: If an employee earns more than the amount above in their applicable payroll period, taxes for that payroll period can not be deferred, therefore, the employee could have deferred taxes on one payroll, but not on the next.

  • All deferred taxes must be repaid.
    • Congress has not approved making the deferral a forgiveness.
    • The “Deferral Period” is September 1 – Dec 31, 2020.
    • The “Repayment Period” is Jan 1 – April 30 2021.
    • Employers who choose to participate and allow employees to defer taxes must also collect and are financially responsible for repaying the deferred taxes, even if the employee is no longer employed in 2021.

How it works

  1. The worksite owner/key manager reviews all information on this page.
  2. An authorized worksite manager / owner completes the Client Enrollment Form.
  3. AdvanStaff HR verifies the enrollment via an email AND a phone call.
  4. The worksite manager will be given an enrollment form to have the employee sign that states the conditions and responsibilities of the employee to repay the deferral during the “Repayment Period” of jan 1 – April 30, 2021.
  5. The employee agrees to the terms and conditions of the program and enrolls.
  6. The worksite payroll manager turn turns on the deduction for that employee in the AdvanStaff payroll system. The dedicated payroll rep will instruct and train the worksite manager on how to enable this feature. Watch the training video here.
  7. The worksite manager must manage the employee they allow to participate in the program.

Additional Guidance provided on Friday August 28th.

Preliminary Guidance and clarification can be read here.

Summary Items are as follows:

  • Who is required to repay the taxes?
    • The employee must “repay” the deferred taxes during the “Repayment Period of Jan 1 – April 30, 2021.
    • Participating employers are obligated to fund the tax deferrals regardless of the employees ability to repay the deferred taxed.
    • The employer may only collect deferred taxes during the “Repayment Period” of Jan 1 – April 30, 2021. The employer may not collect repayment of deferred taxes at termination outside of this “repayment Period.”
    • If necessary, the employer may make arrangements to otherwise collect the total Applicable Taxes from the employee.
  • Interest, penalties, and additions to tax will begin to accrue on May 1, 2021, with respect to any unpaid Applicable Taxes. As stated previously, the employer is ultimately responsible repay all deferrals. As a result, the employer is responsible for any penalties or interest that may result from participation in the program.
  • If necessary, the worksite employer may make arrangements to collect the total applicable taxes from the employee, otherwise the employer is responsible for the repayment of the deferred taxes.
  • The determination of Applicable Wages is made on a pay period-by-pay period basis. If the amount of wages or compensation payable to an employee for a pay period is less than the corresponding pay period threshold amount, then that amount is considered Applicable Wages for the pay period, and the relief provided in this notice applies to those wages or that compensation paid to that employee for that pay period, irrespective of the amount of wages or compensation paid to the employee for other pay periods.

Payroll managers are responsible for enabling each employe that requests to defer taxes. This can be done at the timesheet level.

Jackie Presser, our awesome payroll manager, has created a brief training video that instructs how worksite managers can enable/disable this feature by employee.

The tax deferral applies to wages PAID during the period of September 1, 2020 – December 31, 2020 that are generally less than the following amounts on a pre-tax (gross) basis:

  • weekly: $2,000
  • bi-weekly: $4,000
  • semi-monthly: $4,333
  • monthly: $8,666

Payroll managers are responsible for enabling each employe that requests to defer taxes. This can be done at the timesheet level.

Jackie Presser, our awesome payroll manager, has created a brief training video that instructs how worksite managers can enable/disable this feature by employee.

The tax deferral applies to wages PAID during the period of September 1, 2020 – December 31, 2020 that are generally less than the following amounts on a pre-tax (gross) basis:

  • weekly: $2,000
  • bi-weekly: $4,000
  • semi-monthly: $4,333
  • monthly: $8,666

Start with the timesheet:

  1. Enter the timesheet to enter payroll.
  2. Pay attention to the gross pay column every pay period to verify if the employee is under the $4,000 bi-weekly threshold and eligible to defer.
  3. To access the defer toggle, click on the blue man (Employee Details).

Inside the Employee Details tab:

  1. Click on the “Other” tab
  2. The 2020 COVID-19 Social Security Deferral toggle should be set as appropriate for each employee.  Either to “Use Client Level Setting” (if employee’s gross pay is above the $4,000 bi-weekly threshold) or “Defer 2020 EE SS Tax Accruals” if they are below the $4,000 threshold and elligible.
  3. Click “Save” to return to the timesheet and finalize as normal with your Payroll Rep.
  • Treasury Secretary Mnuchin has stated that participation by employers in the payroll tax delay is voluntary.
    • The worksite employer may opt-in
    • If the worksite employer allows the program and understands the risks, the employee may opt-in.
  • The White House would like to forgive/waive the deferral payment; however, many in Congress oppose the action of forgiveness.

Concerns:

  • On Friday, August 28, the Whitehouse clarified that employee eligibility to the program is based on the gross payroll in each pay period. An employee with wages less than $4,000 (bi-weekly) in one pay period is eligible for that particular pay period, but may NOT be eligible the NEXT pay period if wages cross over the aforementioned threshold. That same employee may be eligible for latter pay periods if wages for that particular period fall below the allowable threshold.
    • The payroll system does not (currently) automatically adjust eligibility based on reported gross wages. Thus, the worksite manager must identify employee wages that may not be eligible for that pay period.
    • We hope to have this functionality added in a future release as the developers have time to implement these changes and will update this page accordingly.
  • Federal tax law and IRS regulations make it clear that the employer is liable for unpaid payroll taxes – This is stated clearly on this IRS webpage. This presents a potentially significant liability or risk to employers who choose to offer the program.
    • If an employee takes a tax deferral in 2019, but is not employed in 2020, the employer is ultimately responsible for repaying the tax. AdvanStaff HR will collect the tax from the employer if the employee is unable to repay the deferral for any reason.
  • Many House Democrats oppose forgiving the tax. An August 21, 2020 letter sent to the President demanded he reverse his ”recent executive action on Social Security payroll taxes and abandon your call to defund Social Security by eliminating the payroll tax permanently.”
    • It is possible that the tax deferral is never forgiven. Will the employee be able to pay 2x taxes later?
    • If the tax deferral does become forgiven and the employer does not participate, then the employee misses out on the windfall opportunity, however, the worksite employer ultimately bears the risk of the legislation not passing and for all uncollectible deferred taxes.
    • There is no easy way to predict if the deferral will be forgiven. There is also no way of knowing if employees will stay around to repay the tax obligation.
    • Advanstaff HR allows employers to opt-in to the program, however the worksite employer must agree to guarantee the repayment of all unpaid or uncollectible employee taxes.

Randy Hardock and Courtney Zinter of Davis & Harman prepared this summary of the payroll tax memorandum, and Randy provided this additional analysis:

  • The Memorandum only directs the Secretary of the Treasury “to use his authority pursuant to 26 U.S.C. 7508A to defer…,” meaning that the Memorandum would appear to have no legal significance until Treasury exercises its authority.
  • The Memorandum makes clear that it “is not intended to, and does not, create any right or benefit . . . enforceable at law or in equity by any party against the United States.” In other words, a taxpayer cannot rely on the President’s memorandum for protection. Only Treasury action can provide relief, if any.
  • The Memorandum also affirmatively directs the Secretary of the Treasury to “issue guidance to implement this memorandum.” That seems pretty clear, although it doesn’t say when.
  • Finally, the Memorandum expressly states that nothing in this memorandum shall be construed to impair or otherwise affect “the functions of the Director of the Office of Management and Budget.”

Company Enrollment Form

Use the form below to enroll your company in the program. Upon completion of the form, an AdvanStaff HR team member will call to confirm the enrollment for verification.