On August 28, 2020, the Secretary of the Treasury issued Notice 2020-65, which provides guidance for employers who have questions regarding the employee payroll tax deferral that was ordered by President Trump earlier in August.


On August 8, 2020, President Trump issued a presidential memorandum (often referred to as an executive order) as a COVID-19 relief measure. The order allows employers to defer the withholding of the employee share of social security tax from employees’ compensation during the last four months of 2020.

The new guidance implements the order and answers some questions.

The Guidance

Below is a summary of Notice 2020-65:

  • The guidance confirms that the payroll tax deferral described in the presidential memorandum applies to the employee portion of the Social Security tax under Sec. 3102(a) and the Railroad Retirement Act Tier 1 tax under Sec. 3202(a).
  • The employee payroll tax deferral applies to wages paid to an employee on a pay date during the period beginning on September 1, 2020, and ending on December 31, 2020.
    • Wages for this purpose are generally defined as those wages included in the base for the imposition of Social Security Tax.
  • The employee payroll tax deferral applies to any employee whose pretax wages or compensation during any biweekly pay period is generally less than $4,000 ($96,000 annually).
    • This determination 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 threshold amount, then the payroll tax deferral applies to that compensation without regard to the amount paid to that employee in other pay periods.
  • The due date for the deferred withholding and payment of these taxes is postponed until the period beginning January 1, 2021 and ending on April 30, 2021. Employers are responsible for the deferred taxes and must withhold and pay the deferred taxes ratably from wages paid between January 1, 2021 and April 20, 2021.
  • No interest or penalties will apply to the withholding unless the amounts have not been withheld and remitted by May 1, 2021.

Notice 2020-65 further states that, if necessary, employers "may make arrangements to otherwise collect the total Applicable Taxes from the employee" — however, no details are provided.

The notice does not provide any guidance for employers regarding a situation in which the employee is no longer receiving wages.


There are several clear takeaways from the guidance.

First, it's clear that employers — not employees — are authorized and may decide whether to defer payment of these taxes but are not required to participate. The Internal Revenue Service clarified this fact on September 3, 2020, when Kelly Morrison-Lee, an attorney with the IRS, stated during the agency’s monthly payroll industry teleconference, "Employers may, but are not required, to utilize the relief.”

Second, an employee may not qualify for the payroll tax deferral in every pay period. For example, if an employee's wages vary from pay period to pay period and their wages could exceed the biweekly threshold of $4,000, there should be pay periods in which they don't qualify. Employers should monitor each payroll run to determine on a pay-period-by-pay-period basis who is eligible for the employee payroll tax deferral.

Third, employers are currently liable for paying any deferred withholding if an employee leaves their company.

Finally, unless there is further Congressional action, the deferred tax will be due by the end of April 2021.

Employers should keep these points in mind as they evaluate and determine whether to participate in this payroll tax deferral.

If you have questions about this employee payroll tax deferral, please reach out to your Delap advisor.