Trump Administration Begins Payroll Tax Deferral Plan

WASHINGTON—The Treasury Department began implementing President Trump’s plan to allow a payroll tax deferral, an executive action he says will help households weather the pandemic-ravaged economy but which faces significant practical hurdles and skepticism from employers.

The government’s announcement came late Friday, just four days before it is scheduled to take effect. It postpones some payroll taxes that would normally be due between Sept. 1 and Dec. 31 and makes them due between Jan. 1 and April 30, 2021. Under this approach, employers who opt to stop some paycheck withholding now could withhold twice as much as usual early next year.

Mr. Trump on Aug. 8 ordered the Treasury Department to allow the tax deferrals under a law that lets the Treasury secretary postpone tax deadlines after a disaster. It still could take time for private payroll companies to reprogram their systems, and employers concerned about costs and legal exposure may not bother changing workers’ tax withholding.

The president wants employers to stop withholding the 6.2% payroll tax that represents the employee’s share of Social Security taxes. The deferral would apply only to workers with annualized salaries below $104,000 and is intended to provide temporary assistance to households while lawmakers are deadlocked on a broader economic-relief bill.

The government’s action doesn’t actually change the underlying taxes, because only Congress can do that. Employees would still owe the taxes eventually. So someone making $75,000 annually could save as much as $1,550 in 2020 but would have to pay that same amount later.