You may be wondering about the “payroll tax deferral” stimulus option announced by President Trump in early August. This is to explain the background of the options and how the District will handle this for the remainder of 2020.

On August 8, 2020, President Donald J. Trump signed an executive memorandum directing the U.S. Department of the Treasury (Treasury) to defer certain payroll tax obligations amid the ongoing COVID-19 pandemic.

President Trump intends to ask Congress to forgive the deferred amount or, if he wins re-election in November, to implement permanent payroll tax cuts. However, as of September 4, 2020, employees deferring their payroll tax obligations under this executive order from September 1, 2020, to December 31, 2020, will be expected to pay the deferred amount out of their pay in the first quarter of 2021.

The District may stop withholding employees’ social security payroll taxes for the period of September 1, 2020 through December 31, 2020. If we take this approach, the deferred taxes will need to be paid by the end of April 2021. This means doubling withholding of social security payroll taxes from January 1, 2021 through April 30, 2021.

While the “tax holiday” could be a short-term boost to the economy, it currently does not allow for forgiveness. That is important because there is no reduction in the social security payroll taxes, but rather a deferral.

After seeking legal guidance, the conclusion is employers (the District) have the option to either “opt in” or “opt out” of the payroll tax deferral option. In an effort to protect our employees from having to pay back significant deferrals after January 1, the School District of Lancaster will opt out of this option. This will prevent employees from double social security payroll taxes being withheld for the first financial quarter of 2021.

If you have any questions, please contact Payroll at payroll@sdlancaster.org