The URL can be used to link to this page

Home My WebLink About2020-09-10; Internal Revenue Service Payroll Tax Deferral; Rocha, LauraTo the members of the: CllY COUNCIL Date~ CA _t_ CC ✓ CM ..:!_ACM ~ DCM (3} ~ Sept. 10,2020 Council Memorandum To: From: Via: Honorable Mayor Hall and Members of the City Council Laura Rocha, Deputy City Manager, Adm' ·strative Services Geoff Patnoe, Assistant City Manager Re: Internal Revenue Service Payroll Tax Deferral {city of Carlsbad Memo ID #2020189 This memorandum provides information related to the Internal Revenue Service (IRS) Payroll Tax Deferral Program (program) issued as a result of a Presidential Memorandum to temporarily defer Social Security tax withholdings in order to provide relief during the COVID-19 pandemic. Background On Aug. 13, 2020, the President of the United States of America issued a Presidential Memorandum directing the Secretary of the Treasury to defer the withholding, deposit and payment of the employee portion of the Social Security payroll tax (Attachment A). On Aug. 28, 2020, the IRS released guidance on implementing the Presidential Memorandum (Attachment B). Discussion The city currently has 16 part-time employees who could be impacted if the city implemented this deferral. Finance and legal reviewed the IRS guidance in conjunction with the Presidential Memorandum and have concluded that this program is optional to implement, at the discretion of the employer. Opting not to implement could be adversely viewed, should some benefit eventually result from the program such as forgiveness of the deferral. However, implementing the program would increase the financial risk to the city as the burden of repayment is the employer's, if not recouped from employees. The timeline to implement is very short, with a begin date coinciding with the first paycheck in September and needed system changes have not been tested. Based on these factors, the City of Carlsbad is choosing to opt out of this program. Next Steps Employees will be notified of the decision and no changes will be made to current payroll tax contributions and reporting. Administrative Services Branch Finance Department 1.635 Faraday Avenue I Carlsbad, CA92008 I 760-602-2430 t Council Memo -Internal Revenue Service Payroll Tax Deferral Sept. 10, 2020 Page 2 Attachments: A. The Presidential Memorandum 2020-17899 B. IRS Notice-2020-65.pdf cc: Scott Chadwick, City Manager Celia Brewer, City Attorney Kevin Branca, Finance Director Ryan Green, Assistant Finance Director Cindie McMahon, Assistant City Attorney .. , .. '":fr":: '11·•,p•• .... l f':l · Attachment A Federal Register/Vol. 85, No. 157 /Thursday, August 13, 2020/Presidential Documents 49587 Presidential Documents Memorandum of August 8, 2020 Deferring Payroll Tax Obligations in Light of the Ongoing ·coVID-19 Disaster Memorandum for the Secretary of the Treasury By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows: Section 1. Policy. The 2019 novel coronavirus (COVID-19) that originated in the People's Republic of China has caused significant, sudden, and unex- pected disruptions to the American economy. On March 13, 2020, I deter- mined that the COVID-19 pandemic is of sufficient severity and magnitude to warrant an emergency declaration under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121- 5207, and that is still the case today. American workers have been particularly hard hit by this ongoing disaster. While the Department of the Treasury has already undertaken historic efforts to alleviate the hardships of our citizens, it is clear that further temporary relief is necessary to support working Americans during these challenging times. To that end, today I am directing the Secretary of the Treasury to use his authority to defer certain payroll tax obligations with respect to the American workers most in need. This modest, targeted action will put money directly in the pockets of American workers and generate additional incentives for work and employ- ment, right when the money is needed most. Sec. 2. Deferring Certain Payroll Tax Obligations. The Secretary of the Treas- ury is hereby directed to use his authority pursuant to 26 U.S.C. 7508A to defer the withholding, deposit, and payment of the tax imposed by 26 U.S.C. 3101(a), and so much of the tax imposed by 26 U.S.C. 3201 as is attributable to the rate in effect under 26 U.S.C. 3101(a), on wages or compensation, as applicable, paid during the period of September 1, 2020, through December 31, 2020, subject to the following conditions: (a) The deferral shall be made available with respect to any employee the amount of whose wages or compensation, as applicable, payable during ari.y bi-weekly pay period generally is less than $4,000, calculated on a pre- tax basis, or the equivalent amount with respect to other pay periods. (b) Amounts deferred pursuant to the implementation of this memorandum shall be deferred without any penalties, interest, additional amount, or addi- tion to the tax. Sec. 3. Authorizing Guidance. The Secretary of the Treasury shall issue guidance to implement this memorandum. Sec. 4. Tax Forgiveness. The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum. Sec. 5. General Provisions. (a) Nothing in this memorandum shall be con- strued to impair or otherwise affect: (i) the authority granted by law to an executive department or agency, or the head thereof; or (ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals. (b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations. 49588 Federal Register/Vol. 85, No. 157 /Thursday, August 13, 2020/Presidential Documents [FR Doc. 2020-17899 Filed 8-12-20; n:15 am] Billing code 48ll-33-P (c) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any paxty against the United States, its departments, agencies, or entities, its officexs, employees, or agents, ox any other person. (d) You are authorized and diTected to publish this memorandum in the Federal Register. THE WHITE HOUSE, Washington, August 8, 2020 Attachment B Part Ill -Administrative, Procedural, and Miscellaneous Relief with Respect to Employment Tax Deadlines Applicable to Employers Affected by the Ongoing Coronavirus (COVID-19) Disease 2019 Pandemic · Notice 2020-65 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.1 Accordingly, the Secretary has determined that employers that are required to withhold and pay the employee $hare of social security tax under section 3102(a) or the railroad retirement tax equivalent under section 3202(a) are affected by the COVID-19 emergency for purposes of the relief described in the Presidential Memorandum and this notice (Affected Taxpayers). For Affected Taxpayers, the due date for the withholding and payment2 of the tax imposed by section 3101 (a), and so much of the tax imposed by 1 The Presidential Memorandum is available at https://www.federalregister.gov/d/2020-17899. 2 The deposit obligation for employee social security tax does not arise until the tax is withheld. Accordingly, by postponing the time for withholding the employee social security tax, the deposit obligation is delayed by operation of the regulations. Thus, this notice does not separately postpone the deposit obligation. 1 section 3201 as is attributable to the rate in effect under section 3101 (a), on Applicable Wages, as defined herein, (collectively Applicable Taxes) is postponed until the period beginning on January 1, 2021, and ending on April 30, 2021. 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)3 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 3 Because Applicable Wages are defined as wages as defined in section 3121 (a) and compensation as defined in section 3231 (e), any amounts excluded from wages or compensation under these sections are not included when determining Applicable Wages. 2 paid between January 1, 2021 and April 30, 2021 or interest, penalt!es, 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. Drafting Information The principal authors of this notice are attorneys of the Office of Associate Chief Counsel, Employee Plans, Exempt Organizations, and Employment Taxes, with the participation of staff from other offices. For further information regarding the guidance under this notice, please call the Notice 2020-65 Hotline at (202) 317-5436 (not a toll- free number). 3