State of Idaho Tables Implementation of Federal 2020 Payroll Tax Deferral Plan

Idaho State Controller Brandon Woolf and Division of Human Resources Administrator Susan Buxton announced today the federal 2020 Employee Payroll Tax Deferral implementation will be tabled for State of Idaho employees pending future federal legislation.

The Controller’s Office has consulted with the Office of the Attorney General and the Division of Human Resources regarding this decision. The federal plan would have enabled the employee portion of the Social Security tax, normally collected from September to December 2020, to instead be deferred and subsequently paid to the federal government January to April 2021.  After considering the significant technical constraints of existing legacy systems combined with the timeframe required for implementation, the decision was made to not implement the tax deferral at this time. 

“We recognize that this federal tax deferral could provide Idahoans with a temporary financial boost during difficult times.” Woolf stated.  “However, I believe it also prudent to seek a solution that avoids the economic hardship that may be caused in 2021 given the programming timeline needed to implement. Our employees need a measure of financial stability and trust with regard to payroll, the state cannot deliver in such a short timeframe.”

The state analyzed the guidance provided by IRS Notice 2020-22 on Aug. 28 to implement the Presidential Memo issued on Aug 8.  Given the complexity of the adjustment necessary to implement both the deferral and collection of the payroll Social Security tax, the Controller’s programmers would need months to accomplish the technical work.

 “We are looking at early December, or even later, before the State could implement the tax deferral portion of the adjustment and employees could actually see the benefit,” State Payroll Division Administrator Scott Smith added. “Additionally, we would still need to design and implement a complex system modification in order to withhold the total taxes deferred by each employee ‘ratably’ starting in 2021.”