President Trump’s mandate to offer a deferral on payroll taxes may be intended to provide relief for employers and workers that are struggling financially due to the COVID-19 pandemic, but it could wind up having a detrimental effect on those same entities in the end. Those who accept the offer (which is not an offer at all, but a requirement when it comes to government employees who make less than $104,000 a year) could opt to stop paying their 6.5% payroll tax from this month through the end of the year—then have to make up the difference by paying at a rate of 13% in the first quarter of 2021. It’s a risky proposition that assumes a dramatic turnaround in business conditions over the coming months. It’s unclear what will happen if an entity takes the offer then simply can’t afford to pay back the owed money. We could see at-risk urgent care operators go out of business. On the other hand, companies that do not take the offer would in effect be penalized if their competitors take the offer and then have their obligation forgiven because they can’t make good. And what happens if an individual employee leaves their job on December 31 after 4 months of not having those taxes withheld? For more context, details, and insights into the potential benefits and risks of the program, check out an article entitled Employee Payroll Tax Deferral—Is It Workable? on the website of the American Institute of CPAs.
Payroll Tax Deferral Could Land Hard on Urgent Care Employers