The Trump payroll tax executive order was a presidential memorandum signed on August 8, 2020, that let employers stop withholding the 6.2% employee Social Security tax from qualifying workers’ paychecks between September 1 and December 31, 2020.1The White House. Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster It was a deferral, not a cut. Every dollar left in workers’ paychecks during those four months had to be paid back the following year.
What Tax the Order Actually Paused
The memorandum targeted one specific tax: the employee half of the Social Security tax, which federal law sets at 6.2% of wages and requires employers to withhold from each paycheck.2Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax The Treasury Secretary was directed to delay that withholding for eligible workers during the four-month window.
Nothing else changed. Medicare tax kept coming out. Federal income tax kept coming out. The employer’s matching 6.2% Social Security contribution kept getting paid on schedule. Only the employee’s Social Security share was paused, and only for workers who met the earnings test.
Who Qualified for the Deferral
Eligibility ran on pay-period earnings, not annual salary. A worker qualified for a given pay period if their gross wages that period were less than $4,000 biweekly, or the equivalent for a different pay schedule.1The White House. Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster That $4,000 biweekly figure works out to roughly $104,000 annualized, but annualized numbers were not the test.
The paycheck-by-paycheck approach created a moving target. Someone earning around $95,000 a year would usually qualify, but a single bonus or a heavy overtime week that pushed one biweekly check to $4,000 or more disqualified that specific paycheck.3Internal Revenue Service. Notice 2020-65 – Relief with Respect to Employment Tax Deadlines Applicable to Employers Affected by the Ongoing Coronavirus Disease 2019 Pandemic The next check, if earnings dropped back below the threshold, was eligible again. Employers ran the test fresh every pay cycle.
Whether Participation Was Voluntary
The rules split between private employers and the federal government, and the split mattered.
Private-sector employers chose whether to participate. The memorandum did not require anyone to stop withholding, and it imposed no penalty on companies that kept collecting the tax as usual. Workers had no legal right to demand the deferral from their employer.4U.S. House Committee on Ways and Means. How It Works: President Trump’s Payroll Tax Deferral Executive Order Many large companies declined, citing the administrative burden and the unpleasant repayment phase. Most private-sector workers never saw the deferral hit their paychecks.
Federal civilian employees and military service members had no choice. Executive branch agencies applied the deferral to every eligible employee, with no opt-out.5National Finance Center. Payroll Tax Deferral FAQs Workers who understood the money would have to be paid back could not simply keep the withholding running to avoid a catch-up bill.
When and How Workers Had to Pay It Back
The pause ended on December 31, 2020. During those four months, eligible workers at participating employers took home an extra 6.2% of gross wages each paycheck. Someone earning $3,500 biweekly saw roughly $217 more per check.3Internal Revenue Service. Notice 2020-65 – Relief with Respect to Employment Tax Deadlines Applicable to Employers Affected by the Ongoing Coronavirus Disease 2019 Pandemic
Then collection started. Under the original IRS guidance, employers had to withhold the deferred amounts ratably from paychecks between January 1 and April 30, 2021. That meant workers who deferred all four months saw their Social Security withholding roughly double during the catch-up period, because employers were pulling both the current 6.2% and an added amount to cover the 2020 balance.
Congress then softened the timeline. The Consolidated Appropriations Act, 2021, extended the final repayment deadline to December 31, 2021, letting employers stretch the catch-up withholding across the full year.6Social Security Administration. Social Security Legislative Bulletin – Section: Section 274 – Extension of Certain Deferred Payroll Taxes Amounts still unpaid after that date started accruing interest and penalties.
If You Left Your Job Before Repayment Was Done
Departures complicated the collection. In the private sector, the employer stayed on the hook: recover it from the worker’s final pay or report the unpaid balance to the IRS. For federal employees, the process was formal. Agencies that separated employees after March 28, 2021, garnished lump-sum payments to cover any outstanding balance. Federal workers who left before that date got a debt letter and moved into the government’s standard debt-collection process.5National Finance Center. Payroll Tax Deferral FAQs
How the Deferral Ultimately Resolved
A 2025 report from the Treasury Inspector General for Tax Administration laid out the final numbers. Roughly 1.1 million employers deferred about $133 billion in Social Security taxes for tax year 2020. About $131 billion, or 98%, was paid back. The remaining $2 billion was still unpaid across 167,373 employer accounts.7Treasury Inspector General for Tax Administration. Most Employers Paid Their Deferred Social Security Taxes But Some Penalties Were Incorrect
The IRS assessed roughly $591 million in penalties and interest on employers who missed the repayment deadlines. The same TIGTA report found the IRS incorrectly assessed $73.7 million in penalties on nearly 9,550 business accounts, where employers had actually paid on time or had credits available but the transactions had not posted to their accounts fast enough to stop an automated penalty. As of May 2025, around 10,000 employers still had unresolved unpaid deferrals awaiting manual IRS review.
How It Differed From the CARES Act Payroll Tax Deferral
The 2020 executive order is often confused with a separate payroll tax deferral created earlier that year by the CARES Act. They were two different programs.
The CARES Act deferral applied to the employer’s share of Social Security tax, plus the equivalent portion owed by self-employed individuals. Half was due by December 31, 2021, and the other half by December 31, 2022.8Internal Revenue Service. Deferral of Employment Tax Deposits and Payments Through December 31, 2020 The Trump memorandum applied only to the employee’s share withheld from paychecks and had its own repayment timeline. Self-employed workers were not covered by the memorandum. Their relief, if any, came through the CARES Act.