The voluntary federal payroll tax “holiday” went into effect at the beginning of the month, but it remains to be seen how many Nebraska employers, including credit unions, are participating.
To-date the League is unaware of any credit union that has decided to participate in the payroll tax deferral program. The hesitancy appears to stem from the fact that the tax break amounts to a forbearance and not a forgiveness.
The presidential memorandum issued on Aug. 8 allows employers to defer withholding and payment of an employee’s portion of the Social Security tax between September 1 and December 31, 2020 if the employee’s wages are below a certain amount.
The memorandum indicates that deferred taxes must be repaid, but it is currently unclear if the federal government will take any action to forgive future repayment of employees’ deferred Social Security taxes, although at least one bill has been proposed related to the payroll tax. Texas Republican Rep. Kevin Brady late last week introduced the Support for the Workers, Families and Social Security Act, which he says would reduce the 6.2% FICA taxes to zero through the end of the year for all employees.
Regarding guidance on the memorandum issued by the Department of Treasury and IRS on Aug. 28, the temporary Social Security tax deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately. No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a bi-weekly pay period, according to the guidance.
The guidance does not indicate that employers must participate, and many credit unions, in fact, are not. Since the Governor declared credit unions to be an ‘essential business,’ most employees have not sustained a substantial income loss during the pandemic. Most credit union employees have remained working, whether it has been in the office or remotely from home.
Click here to access the Department of Treasury and IRS guidance.
