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Executive Order Regarding Payroll Taxes (August 8, 2020)

On Saturday, August 8th, President Trump issued an executive order titled “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” (the “Order”)[1].  The Order provides for the deferral of certain payroll taxes.  The Order will be effective for wages paid on or after September 1, 2020 and will have to be implemented pursuant to Guidance issued by the Treasury Department.  Thus, this blogpost provides some initial information and thoughts about the Order.  We expect that more details will become available soon.

The Order directs the Secretary of the Treasury to use his authority under Section 7508A of the Internal Revenue Code to defer the withholding, deposit and payment of a portion of the Social Security taxes [2] that certain employees will owe with respect to wages paid during the period of September 1, 2020 through December 31, 2020.

Employee Social Security taxes are paid in two parts.  The Old Age, Survivors and Disability Insurance (“OASDI”) tax is 6.2% of an employee’s annual wages, up to a maximum of $137,700 of wages for calendar year 2020.  The Medicare tax is 1.45% of all of an employee’s wages.

Specifically, the deferral Order would apply only to the OASDI portion of the tax, and only for some employees.  Medicare taxes will still have to be paid by all employees on all wages.

The deferral Order states that it is limited to employees with bi-weekly pay that is generally less than $4,000 on a pre-tax basis (with appropriate adjustments made for other payroll periods).  Roughly speaking, that means that the deferral of tax will not be permissible for an employee with an annual salary in excess of $104,000.  It is unclear how the deferral rule is supposed to work if an employee’s pay may be fluctuating above and below the $4,000 per bi-weekly pay threshold.

In addition, notwithstanding the amount of an employee’s bi-weekly pay, as a practical matter, the deferral order will have no impact on any employee whose 2020 wages have already exceeded the $137,700 OASDI tax wage limit.  Likewise, any benefit of the deferral order will cease for an employee who reaches the $137,700 wage limit between September 1 and year-end.

It is extremely important to note that the Order provides for the deferral (not forgiveness) of the taxes.  Recognizing this, the Order directs the Secretary of Treasury to both (1) issue guidance to implement the Order, and (2) seek ways to have the tax forgiven, including through legislation.  However, any employee taxes deferred may well have to be paid at a later date.

Given the payroll processing difficulties that may be presented by an attempt to implement this Order, as well as the prospect of employees being required to nevertheless pay the taxes at a later date, many employers have already expressed concern about this Order.  Please stay tuned for additional guidance on this subject.

[1] see

[2] Section 2302 of the Coronavirus, Aid, Relief and Economic Security (“CARES”) Act already allows employers and self-employed persons to defer the employer share of Social Security taxes through the end of 2020. See

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 224


About this Author

Gregory J. Viviani, Squire Patton Boggs, Employee Benefits Lawyer,

Gregory Viviani focuses his practice on employee benefits. He has experience in all aspects of employee benefits law and related income tax matters including ERISA requirements, tax-qualified retirement plans, nonqualified deferred compensation plans, fringe benefits and employment taxes. He has particular experience in matters relating to governmental bodies and tax-exempt organizations.

216 479 8622
Matthew A. Secrist, Squire Patton Boggs, Employment Lawyer in Cleveland OH

Matthew Secrist focuses his practice on employee benefits and executive compensation matters. He has experience in a wide range of employee benefits matters, including tax qualified retirement plans, nonqualified deferred compensation plans and arrangements, welfare benefit plans, and COBRA, HIPAA and Patient Protection and Affordable Care Act issues.

He also advises clients regarding compliance with Code Sections 162(m) and 409A. His executive compensation experience includes employee fringe benefit plans, stock option plans, supplemental executive retirement plans (SERPs), employment agreements and severance plans.

Matthew also has experience in advising tax-exempt entities from formation to termination, as well as representing clients in controversy proceedings before the IRS and Department of Labor.

216 479 8006