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On August 8, 2020, the President of the United States issued a Presidential Memorandum directing the Secretary of the Treasury (Secretary) to use his authority pursuant to section 7508A of the Internal Revenue Code (Code) to defer the withholding, deposit, and payment of certain payroll tax obligations, specifically the 6.2% employee withholding portion of some workers’ Social Security taxes.



Saltwater Christian College (SCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

The CFO at SCC called us about the current hoopla over a recent Presidential memo that defers certain payroll tax obligations.  “What should we do about this?  The IRS just provided some information – that is not altogether clear – and the process could begin September 1.”

“First off,” we told her, “we do not know of any institutions that are ‘participating’ currently.  The guidance allows employers affected by the COVID-19 emergency to defer withholding and payment of the employee’s portion of the 6.2% Social Security tax payable on wages or compensation paid September 1, 2020 through December 31, 2020. The deferral only applies to an employee whose wages or compensation, payable during any biweekly pay period, calculated on a pre-tax basis, generally is less than $4,000. The IRS guidance basically holds the employer responsible for the deferred tax payments – apparently requiring make-up or double withholding from employees for the first four months of 2021.”

“So, as it stands, the process would be for the employees to get a 6.2% ‘raise’ for September through December of this year, but then have to pay it back from January through April of 2021?”

“That’s what it looks like.”

“Are we required to do this or is it optional?”

“That’s a good question.  The Secretary of the Treasury stated it was optional.  But the IRS notice is not clear on this issue.”

“Wow.  Okay, what if an employee leaves before these timeframes are up?”

We answer.  “The IRS guidance does not cover that, except to imply that the employer would be responsible to pay the deferred taxes.”

“I read somewhere that the President wants to ‘forgive’ all of these amounts.  What happens if we don’t defer and these taxes are waived in the future?  Can the employees get a refund or a credit for overpaid FICA?”

“Congress would have to enact legislation to waive this deferred tax liability for employees.  And, who knows…”

“What happens if the deferred taxes are not ‘repaid’ in a timely manner?”

“The IRS guidance states that Interest, penalties, and additions to tax will begin to accrue on 5/1/21.”



From IRS Notice 2020-65 – August 17, 2020:

Applicable Wages

For purposes of this notice, Applicable Wages means wages as defined in section 3121(a) or compensation as defined in section 3231(e) paid to an employee on a pay date during the period beginning on September 1, 2020, and ending on December 31, 2020, but only if the amount of such wages or compensation paid for a bi-weekly pay period is less than the threshold amount of $4,000, or the equivalent threshold amount with respect to other pay periods. The determination of Applicable Wages is made on a pay period-by-pay period basis. If the amount of wages or compensation payable to an employee for a pay period is less than the corresponding pay period threshold amount, then that amount is considered Applicable Wages for the pay period, and the relief provided in this notice applies to those wages or that compensation paid to that employee for that pay period, irrespective of the amount of wages or compensation paid to the employee for other pay periods.

Payment of Deferred Applicable Taxes

An Affected Taxpayer must withhold and pay the total Applicable Taxes that the Affected Taxpayer deferred under this notice ratably from wages and compensation paid between January 1, 2021 and April 30, 2021 or interest, penalties, and additions to tax will begin to accrue on May 1, 2021, with respect to any unpaid Applicable Taxes. If necessary, the Affected Taxpayer may make arrangements to otherwise collect the total Applicable Taxes from the employee.



  • An August 8, 2020 Presidential memo sets forth a plan to allow employers to defer certain employee’s portion of Social Security tax withholding for four months.
  • The apparently optional “program” begins September 1, 2020 and runs through December 31, 2020.
  • The IRS issued limited guidance on August 28, 2020 in the form of Notice 2020-65.
  • Many questions still remain, institutions should carefully weigh whether to ‘participate’ or not, and we hope for more clarity from the IRS soon.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

© 2020 Moja & Company, LLC