Calls For Clarity On US Payroll Tax Deferral
In the United States, while all eyes are on the forthcoming Presidential election, behind the bluster and bombast there are attempts to keep the business of doing business running smoothly, with the US Chamber of Commerce joining calls for the Treasury Department to issue clear guidance on the recently announced payroll tax deferral.
Earlier this month, President Trump signed an executive order requiring Treasury to defer the collection and payment of employee payroll taxes for the period September 1, 2020, until December 31, 2020. The deferral is available to employees whose wages or compensation was less than USD4,000 during any bi-weekly pay period, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.
Trump signed the order, bypassing Congress, after talks between Republicans and Democrats on a new COVID-19 tax bill stalled. Trump said in comments alongside the signing of the order that he would cancel the requirement to pay such amounts if he wins the US election scheduled for November 3, 2020. A subsequent announcement by Treasury Secretary Steven Mnuchin indicated that the payroll tax deferral would not be mandatory for employers to implement.
In a letter addressed to Treasury Secretary Steven Mnuchin, the Chamber warned that “without Congressional action to forgive the payroll tax, [the EO] threatens to impose serious hardships on employees who will face a large tax bill at the end of the deferral period.”
In its letter to Mnuchin, the Chamber concluded:
“The Chamber appreciates recent reports that this EO will be optional but needs additional clarification about who elects this application. Further, there is uncertainty as to who is ultimately liable for the repayment of the deferred taxes, and when the repayment will be due and what mechanism will be used to collect that repayment.”
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look