The World Floor Covering Association is advising employers to approach with caution the payroll tax suspension period available from Sept. 1–Dec. 31, 2020, suggesting there are several questions the Internal Revenue Service has yet to address that could leave employers liable.

The payroll tax suspension applies to employees with regular wages less than $4,000 for a biweekly period, and includes wages, bonuses, overtime and a portion of any health insurance benefits the employer paid.

The IRS gives the employer the option to decide whether to accept the temporary tax suspension, which must be paid back during the first four months of 2021 to avoid penalties and interest. “The notice does not address whether an employee can opt out of the suspension,” WFCA noted. “It is also unclear if an employer can select which employees will have the tax suspended or whether it must suspend collection for all eligible employees if it decides to suspend collecting taxes.”

WFCA stated that unless Congress takes action to forgive the tax deferrals, employers may be liable for paying back the deferrals if the employer is unable to collect from employees who are terminated, have resigned or are on leave during the repayment period in 2021.

“While an employer can opt to continue to collect the payroll taxes, this can also create problems,” WFCA also stated. “If Congress later takes legislative action to forgive the deferrals, employees may feel that they ‘lost’ out on a benefit because their employers decided to continue to collect the taxes. Whether Congress will pass legislation to forgive the deferrals is uncertain in light of its impact on funding to Social Security.”

WFCA advised employers to consult with tax and legal advisors when determining whether to accept the payroll tax suspension opportunity.