According to the American Payroll Association:
IRS Guidance on Employee Social Security Tax Deferral On August 28, the IRS released guidance to implement a presidential memorandum directing the Secretary of the Treasury "to defer the withholding, deposit, and payment" of the employee share of social security taxes on wages paid between September 1 and December 31, 2020 [Notice 2020-65, 8-28-20].
Deferral is voluntary for employers
According to Treasury Secretary Mnuchin, the guidance allows employers to defer the withholding and depositing of the employee share of social security tax on applicable wages paid between September 1, 2020, and December 31, 2020. This would seem to indicate that the decision to defer the withholding is at the employer's option. In 2021, employers then will withhold the deferred amount from employees' wages and compensation paid between January 1, 2021, and April 30, 2021, and make appropriate tax deposits based on the withholding date. If the deferred amounts are not paid by April 30, 2021, the IRS will assess interest and penalties. The notice also provides that, if necessary, employers "may make arrangements to otherwise collect" the taxes from the employee. Employers not participating in the deferral must continue to withhold and deposit the employee share of the social security tax as usual. Also, if an employee's wages have already exceeded the social security wage base ($137,700 for 2020) there is nothing to defer because the employee will not be paid any social security wages for the remainder of the year.
The notice clarifies that the determination of applicable wages (i.e., wages and compensation subject to social security and Railroad Retirement Tax Act taxes, but not Medicare tax) is made on a pay period-by-pay period basis. If an employee's applicable wages in a current pay period are below $4,000, the deferral is available for the pay period "irrespective of the amount of wages or compensation paid to the employee for other pay periods."