Recently President Donald Trump passed executive orders on deferring payroll taxes for employees through the end of 2020. Many are stuck wondering what this means and how it could affect you. This is even more worrisome for small business employers.
Here are a few things to know about deferment of payroll tax.
This deferment tax is for employees that are qualified and make roughly $104,000 or less. As this is essentially an interest free government loan, it begs the question on when these taxes get paid back, and if the employer or employee is responsible for paying them. This currently isn’t tax forgiveness and could result in a larger chunk of money being owed at the end of the year1.
The employee has 6.2% of their paycheck going to Social Security, and the employer matches this with another 6.2%. Yet the employer remits the whole tax to the government. If the taxes have to be paid in the future, how will employers collect the tax from their employees? All at one time? Over time? What if the employee no longer works there; does that mean the employer has to pay it all out of their pocket?
Ultimately, the business is on the hook for these taxes and will face the risks.
As a small business owner with employees, I can tell you that taxes are one of my largest expenses. Personally, taking any kind of loan from the government seems like the same thing as using a credit card. Zero interest or not, I wouldn’t ever want a credit card with the US government. As a small business owner and Certified Tax Specialisttm my niche is to protect business owners assets and income from taxation. If there is anything you'd like to talk further about use the scheduling link below.