[US] Americans must realise the Payroll Tax Holiday is not a tax cut

[US] Americans must realise the Payroll Tax Holiday is not a tax cut
08 Sep 2020

On August 8, President Trump signed an Executive Memorandum directing the Treasury Secretary to initiate a payroll tax holiday. The title of the memorandum was: Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, making it clear that the tax holiday is not a tax cut. The keyword is “deferring” not cutting, nevertheless, it continues to be reported as a tax cut. The payroll tax deferral applied to those earning below $100,000 a year. (Link via Forbes' original reporting)

On August 28, the IRS issued guidance specifically on “deferring” the payroll tax obligations, rather than cutting or forgiving them. The guidance “postponed” the payment of payroll taxes, it did not remove employers’ obligation to pay them. It moved the due date for payroll taxes back four months from September-December 2020 to January-April 2021, meaning employers do not have to withhold and pay the payroll taxes for the rest of this year but they will still have to make these payments in the first four months of 2021. Forbes reports further essential takeaways from the IRS guidance.

On August 8, President Trump signed an Executive Memorandum directing the Treasury Secretary to initiate a payroll tax holiday. The title of the memorandum was: Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, making it clear that the tax holiday is not a tax cut. The keyword is “deferring” not cutting, nevertheless, it continues to be reported as a tax cut. The payroll tax deferral applied to those earning below $100,000 a year. (Link via Forbes' original reporting)

On August 28, the IRS issued guidance specifically on “deferring” the payroll tax obligations, rather than cutting or forgiving them. The guidance “postponed” the payment of payroll taxes, it did not remove employers’ obligation to pay them. It moved the due date for payroll taxes back four months from September-December 2020 to January-April 2021, meaning employers do not have to withhold and pay the payroll taxes for the rest of this year but they will still have to make these payments in the first four months of 2021. Forbes reports further essential takeaways from the IRS guidance.