Dear Healthcare Management Consultants Client,
Following is a quick update regarding the executive orders signed by President Trump last Saturday, August 8 with the intent of providing financial relief on payroll taxes due to the ongoing Covid-19 pandemic.
Following is a link to the actual text of the orders signed by the President:
Stimulus talks are currently stalled on Capitol Hill to try to address last month’s ending of the supplemental $600 unemployment compensation, student loan bills, and eviction notices.
In the meantime, the executive orders signed by the president defer an employee’s obligation to pay the usual 6.2% Social Security tax per paycheck. This action applies to persons who are making less than $4,000 every two weeks, which equates to an annual salary of $104,000. The order also instructs the Treasury Department to look into how the government can forgive the deferred tax payment. But for now, at least, observers indicate that the tax deferred tax obligation is not being forgiven.
Things to Be Aware of:
• Payroll tax relief, as outlined in the Presidential directive, would require employers to take steps to ensure compliance including working with payroll administrators and providers to adjust payroll processes by September 1.
• Employers will need to explain to employees that their take home pay would increase through the end of this calendar year. However, the employee may be required to repay these deferred taxes at a future date (expert guesses are that this is unlikely, but remains to be seen.)
• Payroll tax relief only applies to the Social Security portion of FICA that the employee pays at the rate of 6.2%. Compensation that is taxed at the 6.2% rate is capped at a taxable maximum of $137,700 for 2020.
• As an example, a person making an annual gross income of $50,000 could see savings of $258.33 per month.
More information is expected from the Treasury Department within a few days on further employer requirements. We will keep you updated on developments as they occur.
Take care and have a great day!
Your Healthcare Management Consultants Team