COVID-19, Tax & Assurance Guidance

COVID-19 Relief: Executive Orders

Posted on August 12, 2020 by

Sue Tuson

Sue Tuson

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The news over the past few weeks has been filled with stories about the failed attempts of Congressional leaders and the White House to agree upon new COVID-19 relief legislation. Although repeated meetings were held to reach a broad consensus it appears neither side can find an acceptable middle ground. It is against this backdrop, on August 8, 2020, that President Trump signed a series of Executive Orders to provide additional relief to individuals. They include a payroll tax deferral, new unemployment benefits, student loan deferrals, and foreclosure/eviction changes. To help clients, prospects, and others, Clayton & McKervey has provided a summary below.

Payroll Tax Deferral

To provide relief to individual taxpayers there will be a deferral on employee-side social security taxes. Typically, a W-2 employee is taxed at 6.2% of earnings for OASDI, or social security tax, and employers are required to match the payment. Since the CARES Act already deferred the employer-side taxes, the Order applies only to employees. Note the deferral period begins on September 1, 2020, and extends through December 31, 2020.

Key Details

  • Income Exclusions – The Order mandates that only those who earn generally less than $4,000, calculated on a pre-tax basis, on a bi-weekly pay period are eligible. This means that only those individuals who make (pre-tax) $2,000 per week or $4,333.33 semi-monthly are eligible to participate. In the event an employee’s pay exceeds the limit at any point, then the amount of OASDI must be withheld and paid by the employer.
  • Penalties – The Order also prohibits the assessment of penalties, interest, or additional taxes on deferred payments by eligible individuals.
  • Tax Forgiveness – There is mention of tax forgiveness, but no specific rules or requirements were issued. The Executive Order directs the Secretary of Treasury to explore all avenues, including legislation, to eliminate the obligation to pay deferred taxes.

It is important to note this is not an elimination of the payroll tax. Participating employees will be required to pay all outstanding taxes in January 2021. Additional guidance has yet to be issued to help employers comply with this change.

Unemployment Benefits

The Order authorized $44B to be taken from the FEMA fund to pay for extended federal unemployment benefits. The authorized amount of $400 is less than the $600 previously offered and requires states to pay 25% of the benefit. This will create challenging circumstances for many states already struggling with COVID-19 expenses.

Student Loan Relief

Payment deferral and penalty relief will be granted for all student loans held by the Department of Education through the end of the year.

Foreclosures and Evictions

Unfortunately, there were no changes made to extend existing protections many need. However, various federal departments are required to:

  • Consider whether any measures temporarily halting residential evictions of any tenants for failure to pay rent are reasonably necessary to prevent the further spread of COVID-19.
  • Identify any and all available Federal funds to provide temporary financial assistance to renters and homeowners who, as a result of the financial hardships caused by COVID-19, are struggling to meet monthly rental or mortgage obligations.
  • review all existing authorities and resources that may be used to prevent evictions and foreclosures for renters and homeowners resulting from hardships caused by COVID-19.al hardships caused by COVID-19, are struggling to meet their monthly rental or mortgage obligations.
  • Act, as appropriate and consistent with applicable law, to promote the ability of renters and homeowners to avoid eviction or foreclosure resulting from financial hardships caused by COVID-19.  Such action may include encouraging and helping public housing authorities, affordable housing owners, landlords, and recipients of Federal grant funds in minimizing evictions and foreclosures.

Contact Us

The status of the Executive Orders is unclear and only time will tell if they will be implemented, included in new legislation, or face legal challenges. Whatever the outcome, it does provide insight into the type of additional relief businesses can expect in the coming months. If you have questions about the information outlined above or need assistance with an accounting, tax, or PPP issue, Clayton & McKervey can help. For additional information call us at 248-208-8860 or click here to contact us. We look forward to speaking with you soon.

Sue Tuson

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With her advanced technical skills and experience with complex global businesses, Sue is known to be a creative & responsive international tax advisor.

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