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President Trump issues Executive Orders for payroll tax relief, other pandemic-related assistance

August 2020


President Trump on August 8 issued four executive orders intended to provide employee payroll tax relief, enhanced federal unemployment insurance (UI) benefits, financial assistance for renters and homeowners facing eviction or mortgage foreclosure, and student loan payment relief.

The executive actions came after Administration officials and Democratic Congressional leaders failed to reach an agreement on ‘Phase Four’ legislation to provide additional COVID-19 economic relief by a self-imposed, end-of-the-week deadline. While some progress reportedly had been made, a number of key issues -- including the overall cost of the legislation, the amount of extended unemployment assistance, and additional funding for state and local governments -- had not been resolved.

The executive order on payroll tax relief directs the Treasury Secretary to use his authority under Internal Revenue Code Section 7508A to defer the withholding, deposit, and payment of the employee share of certain payroll taxes (the 6.2% OASDI payroll tax or equivalent Railroad Retirement Tax Act taxes on employees) on wages or compensation paid during the period of September 1, 2020, through December 31, 2020. The payroll tax deferral would be available to employees earning less than roughly $100,000 per year ($4,000 pre-tax paid every two weeks, or the equivalent).

President Trump has said he would seek to extend the payroll tax deferral and "terminate" the deferred obligation payroll tax if he is re-elected. The executive order directs the Treasury Secretary to explore avenues, including legislation, to eliminate the obligation to pay the deferred payroll taxes.

House Speaker Nancy Pelosi (D-CA) and Senate Democratic Minority Leader Chuck Schumer (D-NY) have criticized President Trump’s executive orders for bypassing Congress and failing to address the full range of issues that are part of the ‘Phase Four’ negotiations.  White House and Congressional leaders have left open the possibility that negotiations could resume to reach an agreement on broader legislation that could pass both the Democratic-controlled House and the Republican-led Senate. Congress also faces September 30 deadlines to continue funding for the federal government and to reauthorize the federal highway program.

The takeaway

President Trump’s executive order on deferring employee payroll taxes leaves many questions on the logistics and implementation for Treasury and the IRS to address.  Employers will want to analyze the coming guidance closely before proceeding to make changes to their employee tax withholding systems. Individuals and businesses also will want to see if the White House and Congressional leaders resume negotiations to reach an agreement on ‘Phase Four’ legislation that could provide broader economic relief.

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Kevin Brown

Principal, Tax Controversy and Regulatory Services Leader, PwC US

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