1. Why are my FICA taxes being deferred?
On August 8, 2020, President Trump issued a Presidential Memorandum to temporarily defer associate’s contributions to Social Security (FICA) in order to provide relief during the COVID-19 pandemic. Each paycheck, you contribute 6.2% of your wages into your Social Security (FICA) account. The guidance instructs us as your employer to postpone collecting your portion of the Social Security (FICA) contribution until 2021 after which you will have to repay all deferred taxes.
2. What is the deferred FICA tax?
Social Security is 6.2% and is commonly referred to as FICA tax. The tax funds the Social Security program, which is administered by the Social Security Administration. Your FICA deduction is found on your paycheck stub under ‘Current Deductions.’
3. How is the FICA tax calculated?
FICA tax is set by law at 6.2%. The tax is calculated as 6.2% of wages that are subject to FICA.
4. Can I opt-out of the payroll tax deferral?
No. The Executive Order (Presidential Memorandum) requires the Exchange and other agencies to implement the tax deferral. As such, associates are not able to opt-in/opt-out of the deferral.
5. Does this affect any of my other tax withholdings?
No. Pursuant to the Department of Treasury and the Internal Revenue Service Guidance, this only affects your Social Security tax (FICA) withholdings, which will be deferred from September 2020 through the end of the calendar year 2020.
6. What is the wage threshold amount for determining who will have their Social Security tax (FICA) withholdings deferred through the end of calendar year 2020?
Associates with gross pay less than $4,000 bi-weekly (every pay period) will have their FICA taxes deferred.
7. Does premium pay (i.e. overtime, shift differential) impact the payroll tax deferral?
Yes, if the premium pay increases wages to $4,000 or above in any given pay period, the FICA tax will not be deferred. The tax deferral is calculated on a pay period-by-pay period basis and as such, will vary based on the associate’s wages at or above the wage threshold.
8. When will the payroll tax deferral begin?
The deferral of the FICA tax withholding was effective pay period beginning 5 Sep 2020 and will be reflected on associate’s paycheck for pay period ending 18 Sep 2020.
9. Will I be required to pay back the FICA taxes that are deferred?
Yes. Current IRS guidance indicates the payment of the deferred taxes is postponed until 1 Jan 2021. The deferred FICA taxes during 2020 will be collected from your wages between 1 Jan 2021 – 30 Apr 2021. Additional information on the collection process will be provided in the future.
10. How much will the Exchange collect during each pay period starting 1 Jan 2021 through 30 Apr 2021?
As more information becomes available on the collection of the deferred FICA taxes, we will update here.
11. Can the deferred FICA tax liability be waived or forgiven?
Only Congress has the authority to forgive taxes. No determination has been made on forgiving or waiving the tax deferral debt. Under current IRS Guidance, associates should plan on repaying the deferred taxes beginning 1 January 2021.
12. Can I select my repayment terms, by lump sum or even installments?
Pursuant to current Department of Treasury and Internal Revenue Service Guidance, total deferred FICA taxes must be withheld from wages beginning 1 Jan 2021 and ending on 30 Apr 2021. As more information becomes available on the collection of the deferred FICA taxes, it will be added here.
13. Do I have to pay interest and penalties if not paid after April 2021?
As more information becomes available on the application of interest and penalties, it will be added here.
14. I am separating or retiring before the end of this year; will I be required to pay the deferred taxes back?
If you separate or retire in 2020 before the FICA tax can be collected in 2021, you are still responsible for the FICA tax repayment. As more information becomes available on the collection of any deferred FICA taxes, it will be added here.
15. How will this affect my 2020 and 2021 W-2?
As more information and guidance becomes available from the Internal Revenue Service on how the deferral and collections affect your 2020 and 2021 W-2s, it will be added here.