The first thing we need to note, this is NOT to tax forgiveness, it is a tax deferral. The employer should plan to pay these payroll taxes at some point. So, don’t go buying a camo Ferrari with the tax money until you know for sure it’s being forgiven!
As for the forgiveness of the payroll tax, Section 4 of the memorandum states “The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.”So there is some light at the end of the until although dim, it is there.
While there are some negatives which are being cited, mainly about the social security system we want to focus on the positives this go around.
JPMorgan Chase said in a research note the deferral could add an additional $40 billion a month to the paychecks of Americans. Depending on the employee’s wage, a maximum benefit of $2,149 could be seen in their bottom line. The average American would see about $1,200 in savings over the four-month period.
Payroll tax is made up of 12.4%, 6.2% is paid by the employee and 6.2% is paid by the employer. In this order, the portion paid by the employee is the only amount being deferred. The employer still has to pay their share but will not have to withhold the employee’s share. Is it a fair shake? Maybe, maybe not? What can be said is with the current situation there are many households currently running on half the income and this would definitely help them out if ultimately forgiven.
At NaviPay, we are constantly speaking without clients in order to make sure they are well aware of the many changes happening and make it a priority to help them position themselves in the best place during all these changes. Like we do with our clients, we can help you do the same and get some free payroll while we’re at it!