Payroll Tax Deferral Program Update

On Aug. 8, President Trump issued a presidential memorandum directing the IRS to allow the deferral of withholding, deposit and payment of payroll tax obligations for certain employees effective Sept. 1. IRS guidance provided on Aug. 28 clarifies that employers can, but are not required to, participate in this program. After evaluation and consideration of the IRS guidance, there is concern that while the employer withholding obligation would be deferred in 2020, employees would experience a double withholding in 2021 to recover the taxes due. Further, if an employee separates from state service before the deferred tax was collected, the state may be required to pay the tax from state funds. For these reasons, it has been determined that the program will not be implemented for all State of California employees, including the CSU.