Tax & AccountingAugust 17, 2020

President Trump’s Payroll Tax Suspension Executive Order May Negatively Impact PPP Loan Recipients

President Trump’s Payroll Tax Suspension Executive Order Payroll May Negatively Impact PPP Loan Recipients

On August 8th, President Trump signed an Executive Order allowing employers to defer employees’ payroll taxes from September 1 through December 31, 2020. 

The loan forgiveness rules for the Payroll Protection Program (PPP) requires that at least 60 percent of the funds be used for payroll costs. For PPP purposes, “payroll costs” include the employee portion of payroll taxes. If an employer receiving a PPP loan chose to defer employees’ payroll taxes chose to use the extended 24-week period for its loan, the employer may not be able to include its employees’ portion of the deferred payroll tax contributions in the payroll costs for loan forgiveness purposes because these costs would not have been incurred during the “covered period.” 

Some have suggested that employers who are PPP borrowers should not implement it for this reason (among others). Others aren’t so sure, arguing that the costs have in fact been incurred and would be a liability on the employer’s balance sheet. 

And, others are even less certain, advising a “wait and see” approach in anticipation of Treasury guidance.

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Mark Friedlich
Author at Tax & Accounting
Mark Friedlich, a CPA & tax lawyer, is the principal international & corporate indirect taxation analyst for Wolters Kluwer Tax & Accounting. He is a member of the U.S. Senate Finance Committee’s Chief Tax Counsel’s Advisory Board, advisor to 14 state taxing authorities, and a member of the American Bar Association’s Tax Section and AICPA’s Tax Section leadership teams. Prior to joining Wolters Kluwer he was a Managing Tax Partner at PricewaterhouseCoopers.