Finance shares information on tax deferral memorandum
Recently President Donald Trump signed an executive memorandum to defer certain tax obligations. This memorandum allows a temporary deferral of the employee portion of the 6.2% social security tax (OASDI). The deferral was to go into effect September 1, 2020 and continue until December 31, 2020 and would effectively increase take home pay by 6.2%. However, from January 1, 2021 through April 30, 2021, employees would be required to repay the tax requiring the university to withhold 12.4% (the normal 6.2% and the repayment of 6.2%), significantly decreasing take home pay through the first four months of 2021.
Business Affairs has been monitoring guidance released on this payroll tax deferral memorandum and determined that Saint Leo University will not be participating in this arrangement due to the financial burdens placed upon employees and significant administrative burden on the university.
Here are some of the reasons for this decision:
- This is a deferral of tax. It is not a tax cut. The uncollected tax would be deducted from an employee’s paycheck starting with the check issued on January 15, 2021 and ending with the check on April 23, 2021. This would lower take home pay for the first four months of 2021.
- Once paid back, a corrected Form W-2 would be issued for 2020 and may require employees to refile their taxes.
- Existing guidance does not address whether or not employees can opt out of the program should the company decide to participate.
- There is not sufficient time to identify and implement required program changes and develop accurate tracking methods.
We will continue to monitor any additional guidance that is released, but at this time, the university is not participating.
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