Payroll Tax Update


On August 8, 2020, the President issued four Executive Orders, the most significant for medical practices being a deferral of payroll taxes for the employee portion of Social Security tax.  While the Implementation of the payroll tax provision of the Executive Orders is still is not clear and guidance has been limited, the key provisions are:



  • The deferral period begins September 1, 2020 and ends December 31, 2020.

  • The deferral appears to apply for payrolls issued between September 1, 2020 and December 31, 2020 and not just on hours worked during this period.

  • The deferral only applies to the 6.2% Social Security tax on employee wages.  The employer portion of Social Security still needs to be funded.  It does not apply to the Medicare tax of 1.45% for the employee or employer.

  • The deferral only applies to employees generally earning less than $104,000 annually.

  • The order is a deferral of the tax obligation, not forgiveness of the obligation.

  • The deferred tax would be collected between January 1, 2021 and April 30, 2021.

  • No penalties or interest shall apply.

  • Although it is somewhat unclear, it appears at this time that employers are not required to offer the deferral.

There is nothing in the memorandum that explicitly forgives the deferral and tax forgiveness will require an act of Congress.  Currently, Congress and the Trump Administration appear to be negotiating another COVID-19 relief measure, and that a compromise bill could supersede the President’s actions.

The decision to offer this deferral to employees that qualify will reside with each employer.  Please consult your corporate counsel and accountant before making this decision for your practice.  However, as currently written, the advantages of the deferral on payroll this fall might not outweigh the disadvantages of a “double tax” collection beginning January 1, 2021.


For those with payrolls during the first week of September, please note the need for immediate consideration as this memorandum applies to payrolls issued on or after September 1, 2021.


For HMA bookkeeping clients, we will assume that you do not want to participate in this program unless we hear otherwise.

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