President’s Orders on Payroll Tax Deferral and Unemployment Aid May Face Delays

Washington DC Capitol

What you need to know about President Trump’s recent executive orders

The executive orders signed by President Trump less than one week ago to extend certain federal COVID-19 relief aid to individuals are proving difficult to implement and may be delayed.

Payroll Tax Deferral

Chief among the executive orders was a deferral of the employee’s portion of payroll taxes paid by American workers who earn gross incomes up to $100,000. This is a tax deferral, not a permanent tax cut, which the president could not order without congressional action. That means the taxes that are deferred must be paid eventually.

The executive order sets a starting date of September 1, for the payroll tax deferral and extends it to the end of 2020, but that could be delayed by uncertainty around several questions, including:

  1. Are employers required to defer their workers’ payroll taxes under the executive order? Treasury Secretary Steven Mnuchin has said employers cannot be forced to participate in the deferral under an executive order. This may make it difficult to implement in certain states that require written approval from each employee for an employer to withhold funds from their paychecks that are not mandated by law.
  2. What happens if a worker starts having payroll taxes deferred at one employer, then changes jobs when the taxes must be paid? This question will have to be clarified by IRS regulations, which are yet to be written.

The payroll tax deferral is not popular in Congress with either Democrats or Republicans because it is slow – putting about $60 a week in the pockets of workers earning the U.S. median income of $50,000 – and it does nothing to benefit the roughly 30 million Americans who are unemployed.

Additional Federal Supplement Unemployment Assistance

The president also signed an executive order to provide $300 per week in federal supplemental unemployment benefits, calling for states to kick in another $100 per week, bringing the total supplement to $400 per week for each recipient.

However, participation by states is optional and many state leaders are saying they do not have the money. Moreover, the order limits the supplemental federal aid to unemployed Americans who are already drawing at least $100 per week in unemployment assistance from their states, leaving out the poorest workers.

The $600 per week in supplemental federal unemployment assistance that was provided under the Coronavirus Aid, Relief and Economic Security (CARES) Act expired on July 31, 2020. Whether to extend the aid, and if so at what level, is hotly contested in Washington.

Other executive orders signed by Trump would:

  • Extend the existing deferral of federal student loan payments through December 31, 2020.
  • Direct the U.S. Department of Housing & Urban Development (HUD) to identify temporary financial assistance measures to help renters and homeowners avoid eviction or foreclosure. This is not an extension of the federal ban on evictions, which expired on July 31, 2020. This executive order only directs HUD to do a study.

We will keep you informed of any further federal actions regarding these executive orders or other COVID-19 relief measures.

In the meantime, if you have any questions, please contact your Adams Brown advisor.