The IRS recently added some clarification to the Treasury guidance issued on August 28th (read about the Treasury guidance here).
The new IRS guidance covered:
Employer First, then Employee
The Employer first decides if they want to offer this tax deferral. It is completely up to the Employer to offer this to Employees, if an Employer elects to not offer the deferral then no other decision is needed. If the Employer decides to offer tax deferrals, then Employers should then allow Employees to opt-in to the tax deferral. However, Employers can require Employees to defer taxes as all Federal Government Employees (including military) are being required to defer taxes. We do not recommend this position.
Repayment Timing
For any taxes deferred during the September 1, 2020 to December 31, 2020 period, those taxes should be repaid proportionately across pay periods between January 1, 2021 and April 30, 2021.
Repayment Responsibility
The responsibility of repayment falls on the Employer. Employers can make arrangements with Employees to collect the deferred taxes on a different schedule if needed. This might be necessary if a separation with the employee occurs or if the Employee’s pay is variable. The IRS acknowledged that in the case of a separation, an Employer would still be responsible for paying the deferred taxes and are currently examining this issue.
Employers will likely want to structure arrangements to collect the deferred taxes, such as by collecting the taxes from a final paycheck or by a separate check from the employee. Employers should consider state wage payment laws and other limitations in developing plans for this situation.
What We are Observing
The vast majority of Employers are electing to not participate in this tax deferral, to avoid creating a future financial burden for Employees and to avoid creating a situation where the Employer cannot collect the deferred taxes from an Employee.
What We are Doing to Support the Tax Deferral
We are currently working on a way to support this tax deferral. If you are interested in participating in the tax deferral, please let us know and we will notify you once our support plan is in place.
IRS Deferral of employment tax deposits and payments