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Regarding Social Security Tax Deferral Provision

Information Regarding the Social Security Tax Deferral Provision
In early August, the Federal Government announced a tax provision that permits employers to defer the payment of certain payroll tax obligations. Specifically, this provision allows employers to temporarily defer the collection of the employee portion of the 6.2% Social Security tax beginning September 1, 2020 and ending December 31, 2020. However, starting on January 1, 2021 through April 30, 2021, employees would be required to repay those deferred amounts, in addition to the current year’s Social Security tax withholding.

Based on a careful review of the related guidance published by the Internal Revenue Service (IRS) on August 28, the University of Richmond will continue to collect and remit employee Social Security on behalf of all employees as usual in order to avoid potential confusion, undue hardships, or other complications that might otherwise emerge. Key factors that were considered were as follows:

  • This is a deferral of tax, not a tax cut. The uncollected 2020 taxes would be deducted from employees’ paychecks issued between January 1, 2021 and April 30, 2021. For many employees, this would result in Social Security tax withholding of 12.4% for the first four months of 2021, which would significantly decrease employees’ take-home pay for that period.
  • Current IRS guidance does not specifically address whether or not individual employees would be able to opt out of the program should an employer decide to participate.
  • Due to the late release of the guidance, there is insufficient time to identify and implement required program changes and develop accurate tracking methods.
Given that there is no advantage to employees through this tax deferral and immediate re-payment program, and the administrative work required, the University of Richmond, like many of our peer colleges and universities, has decided to not participate in this program.