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The recent August 28 executive order for payroll tax deferrals can have major effects on employers and employees. From a Microsoft Dynamics GP Payroll perspective, however, the effect depends on how you handle it, if you choose to do so. 

It is important to note the tax deferral is not mandatory and is up to the employer, not the employee. Thus, if the employer chooses to not implement it, that is their right. 

The tax deferral is for the employee portion of Social Security. Dynamics GP separates it for data storage and calculation. However, the pay code setup in GP does not separate the taxability for employee and employer. If you mark a pay code as subject to FICA Social Security, the system will calculate wages and taxes for the employee and employer. 

Microsoft is not releasing an update for Dynamics GP because of the optional aspect of the order and the lack of new tax table changes published by the IRS. If you are a company that would like to implement this executive order, we can talk to you about ideas for managing it. 

Here are some other executive order-related items:

  1. A draft Form 941 has been released. Lines 13b and 24 will be used to report deferrals. The IRS will be providing guidance on Form 941. 
  2. The IRS will provide guidance on repayment as it relates to Form W-2. 
  3. The calculation of tax is by pay period. You could withhold it one week and not another week. 
  4. The participation is by employee. For example, employee A can participate, but not employee B.

Learn more from BKD advisors about the executive order for payroll tax deferrals in these BKD Thoughtware® articles:

•    President Trump Issues COVID-19 Executive Orders, Including Payroll Tax Deferral
•    New Guidance Issued on President Trump’s Payroll Deferral Executive Order

For more information, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.

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