By Payroll and Entitlements Editorial Staff
The President has issued an executive order that cuts payroll taxes through the end of the year. The cut applies to Federal Insurance Contributions Act (FICA) and Railroad Retirement Tax Act (RRTA) taxes. It does not apply to withheld federal income tax. FICA refers to the combined taxes withheld for social security (6.2%) and medicare (1.45%) The specific sections state:
Sec. 2. Deferring Certain Payroll Tax Obligations. The Secretary of the Treasury is hereby directed to use his authority pursuant to 26 U.S.C. 7508A to defer the withholding, deposit, and payment of the tax imposed by 26 U.S.C. 3101(a), and so much of the tax imposed by 26 U.S.C. 3201 as is attributable to the rate in effect under 26 U.S.C. 3101(a), on wages or compensation, as applicable, paid during the period of September 1, 2020, through December 31, 2020, subject to the following conditions:
(a) The deferral shall be made available with respect to any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.
(b) Amounts deferred pursuant to the implementation of this memorandum shall be deferred without any penalties, interest, additional amount, or addition to the tax.
Sec. 3. Authorizing Guidance. The Secretary of the Treasury shall issue guidance to implement this memorandum. (Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, August 8, 2020; https://www.whitehouse.gov/news/.)
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