Special Tax Alert
On Saturday, President Trump issued four executive orders, one of which directs the Treasury Department to defer to use their authority to provide a grace period with respect to the withholding, deposit, and payment of the employee portion of Social Security taxes on wages paid for the period beginning September 1, 2020 and ending on December 31, 2020. The executive order is separate but could be viewed as a companion to the deferral of the employer portion of Social Security taxes that is provided by the CARES Act. Because the executive order does not self-execute a grace period, we expect guidance in the near term. In the meantime, we felt it would be helpful to provide some of our insights, as well as some of our questions, regarding the executive order.
The Executive Order is Requesting a Grace Period for Payment
The executive order requests the Treasury Department to provide a grace period for the employee portion of Social Security taxes. As a result, the upcoming guidance will amount to an interest-free loan, which raises a host of questions, including:
Additionally, it is worth noting that the grace period does not change the due date for the payment of taxes. Therefore, if the amount due is not timely paid by the end of the grace period, then the IRS may assess interest and penalties based on the due date of the payments…