Payroll tax changes 'unlikely' next month as employers await guidance

Employers are missing answers to key questions as the start date approaches

President Trump’s payroll tax holiday is scheduled to start next month, but the government has yet to issue guidance to businesses or payroll processing firms  which means employers may be unlikely to participate.

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Pete Isberg, vice president of government relations for payroll processing firm ADP, told FOX Business that he is surprised guidance hasn’t been issued by now.

“It’s unlikely that many employers will be able to make the programming changes by September 1,” Isberg said. “We’ve advised Congress and Treasury that anything like this normally requires at least six months for an orderly programming transition.”

Isberg, who has met with the IRS about the issue, said that changing tax rates in the middle of the year, mid-quarter and applying it to selected employees is no simple feat  and may mean that wages need to be recorded separately during the deferral period.

TRUMP'S PAYROLL TAX DEFERRAL MAY LEAD TO SIGNIFICANT TAX BILLS FOR WORKERS, BUSINESS GROUPS WARN 

Meanwhile, Isberg noted there are many details employers still need to know, including whether the measure should be an option for all employees if an employer offers it; how workers should elect to defer or not to defer; and what happens if an employee doesn’t make a selection.

The National Payroll Reporting Consortium and the AICPA both sent letters to the government asking for clarification and guidance.

KPMG noted in a post on its website that the “technical aspects of how the deferral and payment process would be implemented remain for the Secretary of Treasury to determine.”

Trump’s executive order specifically asks the Treasury Department to “issue guidance to implement this memorandum.”

The Treasury Department did not return FOX Business’ request on whether guidance is pending and/or when it might be expected.

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As previously reported by FOX Business, the U.S. Chamber of Commerce cautioned that workers could be on the hook for sizable tax bills next year unless Congress takes action to forgive the deferred payments  ranging from around $751 for someone earning $35,000 to nearly $1,610 for someone earning $75,000.

Isberg agreed that, because the measure is a deferral, many workers may not want to participate.

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The payroll tax is paid separately from federal income taxes and funds Social Security and Medicare. Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners.

The executive order applies only to the 6.2 percent Social Security obligation, from Sept. 1 through Dec. 30.

Despite silence from the government regarding further guidance, White House officials have continued to publicize the measure.

White House Economic Adviser Larry Kudlow, for example, spoke about it during an interview with Fox News on Tuesday and during his speech for the Republican National Convention.

Kudlow mentioned “payroll cuts for higher wages” among the additional tax cuts that the White House was working on.

He told Fox News earlier in the day that the president intends to forgive the deferred payments so it is a true payroll tax holiday.

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