insurance and payroll tax deferrals. There are still are many questions regarding how these will be implemented by the government and how employers need to respond to these items, and we’ll keep you up to date on any action items you may need to complete as we gain more clarity on each item.
Under payroll tax deferral order, employees making less than $104,000 per year would have the option to defer their payroll social security taxes from September 1 through December 31 of this year. The purpose of this order is to increase an employee’s take home pay, but employees must keep in mind this tax deferral would most likely need to be repaid. With the effective date of this order only a few weeks away, businesses should start working with their HR and payroll administrators to prepare for how this will impact employee paychecks and prepare their payroll systems to adjust these tax deferrals. Your HR team should have a notification letter ready for all employees eligible for this tax deferral to authorize you to make that change (we’ll provide one in our Forms section). Keep in mind it’s still important to be flexible! Once we hear more from the Treasury on the guidance of this order we’ll know more about what will be required of employees as far as electing and repaying these taxes.
The President also authorized the weekly supplemental federal unemployment benefit to continue at $400. This benefit was previously paid at $600 per week, but that order expired as of July 31. If you have laid employees off or placed them on furlough, you may receive questions about this payment. Specific questions are best referred to the EDD here in California (or other state unemployment offices as applicable)
It’s unclear exactly what happens next as there are some challenges regarding these orders. We will continue to follow the development of these orders and keep you in the know as we hear more.