On Saturday, Aug. 8, 2020, President Donald Trump issued a presidential memorandum (not an executive order, as reported in the popular press) suggesting deferral of the employee portion of FICA taxes from Sept. 1, 2020, through the end of 2020.

The full text of President Trump’s “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” can be found here.

What does the presidential memorandum provide?

  • This particular presidential memorandum is directed to the secretary of the Treasury to take certain actions pertaining to the deferral of the withholding, deposit and payment of the tax imposed by 26 U.S.C. 3101(a), and so much of the tax imposed by 26 U.S.C. 3201 as is attributable to the rate in effect under 26 U.S.C. 3101(a).
  • 26 U.S.C. 3101(a) relates to the employee portion of the FICA tax, which is 6.2% of compensation. The presidential memorandum is silent regarding the employer portion (also 6.2%) of the FICA tax, and thus remains payable by employers without deferral.
  • The Medicare portion (1.45%) of federal employment taxes remains unabated for both employees and employers.
  • The deferral is to start Sept. 1, 2020, and continues through Dec. 31, 2020.
  • The deferral pertains only to employees whose wages or compensation payable during any biweekly period generally is less than $4,000, calculated on a pretax basis, or the equivalent amount with respect to other pay periods.
  • This presidential memorandum provides only a deferral, not tax forgiveness. Section 4 clearly acknowledges such difference, stating that “The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.”

What questions remain unanswered?

Because this is only a deferral, and not forgiveness, there is uncertainty over the continuing liability for the payment of the deferred taxes. Some of the issues presented by this presidential memorandum include the following:

  • It is a directive to the secretary of the Treasury. Thus, until the secretary of the Treasury undertakes appropriate action, apparently nothing changes.
  • The deferral of the tax, if the Treasury secretary implements such under his authority, would not begin until Sept. 1, 2020. It is not clear if the deferral is for compensation earned on and after Sept. 1, or if it pertains to pay periods ending on and after Sept. 1. It should be expected, if implementation of the presidential memorandum proceeds, that clarifying guidance will be released, much like with the Paycheck Protection Program (PPP) aid earlier this year.
  • Because the presidential memorandum contemplates only a deferral, unless the tax liability is forgiven, the employee remains subject to having the deferred taxes withheld once the deferral period expires, presumably the first pay period of 2021.
  • Employers also remain liable because under the Internal Revenue Code, the withholding and transmittal of the employees’ portion of the FICA tax (the 6.2% authorized under Section 26 U.S.C. 3201) falls upon the employer. Those taxes, and the sister tax of 1.45% for Medicare, are known as the “trust fund taxes,” and failure to remit the trust fund taxes when due (even if deferred, it should be presumed) can impose civil and criminal liability on the employer and those in control of the employer.
  • If the employee leaves the employ of the employer on or prior to Dec. 31, 2020, how will the employer be able to retrieve those funds from the employee to satisfy the trust fund tax liability?

What to do?

Nothing, at least for now. Additional guidance may be forthcoming, but as of now, and assuming the Congress does not act to make any of the terms of the presidential memorandum law, there appears to be no imperative to begin the deferral of the withholding tax. In other words, there is no need to change how your employees are being paid or the computation of their taxes. The biggest reason for saying such is that after the deferral period (beginning Jan. 1, 2021), the tax liability will have to be paid. If one or more of your employees leave employment prior to the beginning and duration of the repayment payroll (if more than one pay period is authorized), the employer could be left holding the proverbial bag. There is just too much uncertainty for employers.

Expect further clarification, if not litigation, regarding this particular presidential memorandum. In any event, the withholding would not begin until Sept. 1, 2020.


My colleagues at Sandberg Phoenix and I have extensive experience representing for-profit enterprises, nonprofit organizations, and individuals in their business and personal affairs. While COVID-19 has presented a host of challenges, the underlying principles remain the same. Whether your issues pertain to tax, employment, contracts, ownership and governance, general business matters, or estate planning, we bring a wealth of real-world experience along with our technical advice. If we may be of service to you, please contact me to arrange a meeting – virtual or otherwise, or a phone call – at [email protected] or 314.561.5078.

Be safe. Be well.