September 25, 2020

Volume X, Number 269

September 25, 2020

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September 24, 2020

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September 23, 2020

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SEC Cracks Down on Retirement Fund Advisers’ Undisclosed Compensation and Conflicts

On August 8, 2020, President Trump issued a memorandum with the stated purpose of providing “further temporary relief … to support working Americans” by enabling the deferral of employee Social Security taxes for specific individuals. Specifically, the “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” directs the Secretary of the U.S. Department of the Treasury to defer (not suspend) the withholding, deposit, and payment of the employee component of Social Security taxes on wages paid during the period of September 1, 2020, through December 31, 2020. The deferral is to be made available only to employees whose biweekly compensation “generally is less than $4,000, calculated on a pre-tax basis.” The equivalent in other payroll frequencies is $2,000 weekly; $4,333.33 semimonthly; and $8,666.66 monthly. Any amounts deferred pursuant to the memorandum will not be subject to either penalties or interest. The Secretary of the Treasury is instructed to issue guidance to implement the memorandum and to “explore avenues, including legislation, to eliminate the obligation” for taxpayers to repay the deferred taxes.

Key Takeaways and Considerations

  • Additional guidance is required from the secretary of the Treasury and/or the Internal Revenue Service (IRS) on how to implement the deferral.

  • The memorandum does not include any deferral of the employee portion of Medicare tax or federal income tax.

  • Absent statutory or regulatory authority, it remains unclear if employers may be subject to penalties for failing to withhold the employee component of Social Security taxes. During an employment tax audit, employers are obligated to pay any unpaid taxes to the IRS.

  • Employees may be concerned that they may have to repay the deferred tax amounts, though there is no clarity on when (if ever) such a repayment would be required.

  • If implemented, the relief provided in the memorandum would be in addition to the relief provided under Section 2302 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided for the deferral of the employer portion of Social Security taxes.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume X, Number 225

TRENDING LEGAL ANALYSIS


About this Author

Michael K. Mahoney, Ogletree Deakins, employee benefits attorney
Associate

Mr. Mahoney is a member of the Employee Benefits and Executive Compensation group. He focuses on employment tax matters at both the federal and state levels, the review of labor and tax laws governing qualified plans, and the strategic design of executive compensation plans for a global workforce.

Mike advises employers on a multitude of fringe benefit issues including tax advantageous means of structuring such benefits. He routinely assists clients resolve payroll audits, working with federal and state authorities to reduce assessments on behalf of employers. In...

973-656-1600
Shivam Bimal Employee Benefits Lawyer Ogletree
Associate

Shiv assists clients with employee benefits and executive compensation matters.  He advises clients on a variety of issues related to qualified and nonqualified plans, including plan design, implementation and ongoing administration, correction procedures, Code Section 409A issues, and IRS filing requirements.

Shiv frequently advises clients on taxability of various fringe benefits, employment tax withholding and reporting obligations, worker misclassification issues, and issues related to business travelers.  He also has experience with employment tax and executive compensation related issues pertinent to mergers and acquisitions.  Shiv routinely assists clients with payroll audits at federal and state levels.  He also analyzes foreign benefit arrangements to ensure Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) compliance.

212-492-2500
Randle Pollard Employee Benefits Lawyer Ogletree
Of Counsel

Randle Pollard is a member of the Employee Benefits and Executive Compensation group. He focuses on employment tax matters at both the federal and state levels, the review of labor and tax laws governing qualified benefit plans, and advises client on the taxation of employee fringe benefits.

Randle has over twenty years of tax law experience as in-house counsel, and from prior positions within government, public accounting, and academia. In addition to his practice with Ogletree Deakins, he is a member of the law faculty at American University,...

202-887-0855