President Donald Trump's order to delay collection of payroll taxes thrusts a dilemma on U.S. companies: continue withholding the money from workers expecting bigger paychecks or pass it on and potentially put themselves or their employees at risk of a big end-of-year bill from the IRS.
Trump signed an order over the weekend deferring the due date for payroll taxes, which employers deduct from paychecks and submit to the IRS on behalf of workers. The order just defers the taxes from Sept. 1 to the end of the December. The bill will come due unless Congress agrees to forgive the tax debts.
Companies have just weeks to figure out what their legal responsibility is and then they may have to reprogram payroll systems to accommodate the changes, which defer the due date for those earning less than $4,000 bi-weekly, or about $104,000 a year.
Employers should be cautious because the IRS could go after both a company and its employees if they don't pay the taxes when the executive order expires, said Matt Foreman, an independent tax lawyer based in New York. Late payments would be subject to interest and penalties.
"My advice is keep collecting and keep remitting to the IRS. Tell your employees exactly what doing, and why you're doing it," he said.
That's the decision that OneAmerica Financial Partners Inc., an Indianapolis-based insurance holding company with 2,300 employees across the country, made unless there are further directives from Congress.
"The more I read about this, it's a holiday. Unless it gets passed by Congress or signed into law, people are going to be responsible for making up the FICA difference when they file their tax return," said Jon Schausten, director of payroll and human resources information systems at OneAmerica. He was referring to the Federal Insurance Contributions Act, the formal name of the payroll taxes that fund Social Security and Medicare.
"I don't want to be the bad guy saying, 'Hey, you owe all this extra money' when you file your return,'" he said.
Schausten said few employers would implement the executive order in the current climate. Few large employers have said how they plan to implement the order. Macy's Inc. spokesperson Cheryl Heinonen said in a statement that the retailer is still "reviewing the order and our options."