IRS guidelines put employers on the hook for Trump’s payroll tax break

 

It's obvious the Trump administration wants taxpayers to blame their employers when they have to pay back the postponed taxes, and not Trump.

https://www.cnbc.com/2020/08/28/irs-rules-on-trumps-payroll-tax-cut-put-firms-on-the-hook-for-taxes.html

Darla Mercado, CFP®

Published Fri, Aug 28 20207:53 PM EDT  Updated Aug. 29, 2020

The IRS issued long-awaited guidance on President Donald Trump’s payroll tax deferral Friday night. And it appears to put the onus on employers to collect any taxes due after the holiday ends.

The president signed an executive order on Aug. 8 calling for a deferral of the employees’ portion of the payroll tax from Sept. 1 through the end of the year. [A deferral is a postponement, meaning it will still have to paid in the future.]

Currently, employers and employees share responsibility for a 12.4% levy that funds Social Security and a 2.9% tax to support Medicare.

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The three-page notice the IRS issued on Friday postpones the due date for these taxes until April 30, 2021. After that date, penalties, interest and “additions to tax” will begin to accrue.

Employers – dubbed the “affected taxpayers” in the guidance – “may make arrangements to otherwise collect the total applicable taxes from the employee,” the IRS said in its guidance on Friday.

Since there is no guarantee that the employee’s share of deferred taxes will be forgiven, employers may not want that responsibility, tax professionals said.

“To me, this says you’re telling the employer not to withhold the money, put themselves on the hook and then make ‘some arrangement’ to get the money back – or trust us that we’ll go and forgive it for you,” said Adam Markowitz, enrolled agent at Howard L Markowitz PA CPA in Leesburg, Florida.

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The new guidance from the IRS raises further questions on how the taxman will ultimately get its share of deferred payroll taxes – and the steps employers will have to take to “make arrangements” with workers to collect the money.

“What if the employer hangs onto the taxes in a bank account and the employee leaves? What do we do with the money?” asked Dan Herron, CPA and principal of Elemental Wealth Advisors in San Luis Obispo, California.

“Do we give the money to the employee and tell them to figure out how to report it on their Form 1040?” he asked. “It’s a compliance nightmare.”