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Payroll Tax Deferral

  • 1.  Payroll Tax Deferral

    SILVER CONTRIBUTOR
    Posted 22 days ago

    Has there been anything set up to account for the payroll tax deferral, for employees SS that is effective 9/1/2020?  From what I read, it is employee only, and just the employee SS portion of FICA, and not the Medicare portion.

    Is there a way to do this in Dynamics, to turn off just the employee portion, for employees making under a certain amount?




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    Pamela Stephenson
    Director of Accounting and Finance
    Ashley Ward, Inc.
    Mason OH
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    Academy - Online Interactive Learning from Experts


  • 2.  RE: Payroll Tax Deferral

    TOP CONTRIBUTOR
    Posted 21 days ago
    Things to know:
    1.The employee tax deferral is optional for the employee. So they get to decide individually.
    2. The effective date is Sep 1 thru Dec 31 so that means the first payroll in September
    3. If they elect to take it, the obligation does not go away. It gets clawed back in Q1 2021.

    Here is the procedure we have set up.

    1. Create a new Paycode Business Expense non taxable and non wage. Set it up to post as a Debit Employee Receivable
    2. Run your normal payroll with all SSA deductions thru the Calculate Checks step.
    3. Then export a  Smartlist of the Employee SSA Amount from the Calculate Checks step and import that as a Payroll Transaction Amount for the Employee Business Expense Paycode for the employees with that Paycode.
    4. Delete the Check Build and then rebuild and Calculate Checks with the new Transaction Batch included.

    The result follows:

    1.The GL now has an Employee Receivable equal to the Employee SSA payable (which does not get paid by the company now). Their take home pay has been increased appropriately. See screen shot.
    2.In 2021, if Congress forgives the SSA component, then the Employee Receivable and  the Employee SSA Payable are offset and the employee SSA will need to be adjusted on W-2.
    3.If Congress does not forgive the SSA component,then the company collects it back as a payroll deduction offsetting the Employee Receivable (like a loan) and the Employee SSA Payable is remitted to the govt normally.



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    Thaddeus Suter
    Retus, Inc
    HELOTES TX
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    Academy - Online Interactive Learning from Experts


  • 3.  RE: Payroll Tax Deferral

    TOP CONTRIBUTOR
    Posted 21 days ago
    Edited by Thaddeus Suter 20 days ago
    And some follow up notes:

    Each employee has to make an election. Those that elect the deferral need to understand that the company will collect the SSA through normal deduction but not pay it to the govt. Instead the company will remit it to the employee as a loan (SSA loan) on the same paycheck.  The SSA loan will then be collected back in Q1 2021.
    Its basically an interest free loan from the Govt thru the Employer to the Employee.
    .
    The gamble for the employee is what if congress acts and forgives the deferral and they did not take it? Those that take the deferral might actually get to keep it.
    The company then offsets the Employee SSA Payable and Employee SSA Loan Receivable.
    Done, except the SSA is overstated now on the Employee so we have to edit the W-2s to fix. I don't think that will happen.

    The accounting is not so bad if you set up the Receivable and Payable Sub Account.. Then assign the SSA-Deferral Paycode to the electing employees.

    The only part I don't like is you need to run the payroll build twice. Once to get the SSA amounts and once again to add that amount back through a payroll transaction entry on the new paycode.

    I saw these posts today and was surprised no one had a solution so decided to post up. There may be other ways but I believe best is not mess with the actual payroll SSA. The SSA ultimately has to be paid so treat it as a deferred payment and employee receivable and let payroll do its job.

    I believe many companies will do nothing and maybe no employees will even ask about it unless they thought they get to keep the money.

    edit Sept 2,2020:Here are the IRS Guidelines on which this procedure was created.
    https://www.irs.gov/pub/irs-drop/n-20-65.pdf

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    Thaddeus Suter
    Retus, Inc
    HELOTES TX
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    Academy - Online Interactive Learning from Experts


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