You may have heard that President Trump issued an Executive Order allowing deferral of employee payroll tax from Sept 1, 2020 through Dec 31, 2020. What does this payroll tax deferral mean to your nanny’s paycheck?
The key point about this bill is currently it is only an optional deferral of employee portion of payroll tax (which is the 6.2% total withheld from your employee’s paycheck for Social Security and Medicare).
So as it stands, if you change your nanny’s pay so this amount is not withheld, your nanny will see a small increase in take home pay for the remainder of the year, but will then have to re-pay that increase back by April 30, 2021.
And according the IRS, you as the household employer are responsible for collecting the deferred amount back from the employee between January 1, 2021 and April 30, 2021. If you are unable to collect that amount from the employee, you as the employer would still be responsible for paying it back by or penalties will accrue starting May 1, 2021.
President Trump is hoping that further legislation occurs to make this deferral re-payment forgiven, but that has not occurred yet.
If you and your nanny do decide to stop withholding payroll tax starting September 1, you can do this via the option under Withholdings in the iOS version or Android version of the Paycheck Nanny app of whether to “Withhold FICA”. Turning this option off would enable payroll tax deferral.
For more information on the IRS guidance on this employee payroll tax deferral, see https://www.irs.gov/pub/irs-drop/n-20-65.pdf.