August 7, 2020

Purdue opts out of Social Security tax deferral

On Aug. 8, a federal memorandum was signed that provides for deferral of the 6.2 percent Social Security withholding for applicable pays issued between Sept. 1 and Dec. 31 for employees with gross wages of $4,000 or less during a two-week pay period. Purdue will not adopt this optional deferral.

In making this decision, Purdue considered the following:

  • Eligibility for the deferral may change from paycheck to paycheck, leaving the employee uncertain of their take-home pay between Sept. 1 and Dec. 31.

  • Any employees who participated in the deferral would have 12.4 percent – double the usual rate of Social Security tax – withheld from their wages beginning with Jan. 1 paychecks and continuing until the earlier of April 30, 2021, or the recovery of the full amount of the 2020 deferral.

  • Purdue would be required to withhold and remit these taxes by May 1, 2021, at which time interest, penalties and additions to tax will begin to accrue on any tax the University had not recouped and paid to the Internal Revenue Service. If an employee has a deferred tax from 2020, but leaves employment before it is fully recouped, then Purdue would either have to make arrangements to collect the balance of the tax deferral from the employee in order to remit it in a timely manner, or pay it for the employee and report the imputed income to the employee in 2021. 


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