Drake Accounting®: How does the August 8th presidential memorandum affect payroll tax obligations?
On August 8, 2020, the President issued the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster. Section 2 of the memorandum allows an employer to choose to defer the withholding, deposit, and payment of certain payroll taxes for wages paid from September 1, 2020, through December 31, 2020. The accumulated amount of deferred payroll taxes will become due and payable by the employer by December 31, 2021 (extended from April 30, 2021 per the Consolidated Appropriations Act, 2021).
According to IRS Notice 2020-65, "The employee 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."
If a taxpayer wants to take advantage of this deferral, you would need to manually zero out the Social Security taxes on each employee's paycheck in DAS20. There is no option to zero out these amounts on a global or employee-wide level. If you decide to zero out payroll taxes, you would need to then track the amounts that have been deferred for each employee. The deferred amounts may be needed to complete end-of-year reports for the IRS and/or SSA.
This tracking would need to be done outside of Drake Accounting®.
Paying the deferred amounts
Per IRS Notice 2020-65, the employer "must withhold and pay the total Applicable Taxes that the [employee] deferred under this notice ratably from wages and compensation paid between January 1, 2021 and April 30, 2021... If necessary, the [employer] may make arrangements to otherwise collect the total Applicable Taxes from the employee." There is no automated additional withholding in DAS regarding this payment amount. Overrides must be used on the paychecks and quarterly reports as needed.