Fedex won’t defer payroll tax
Company plans to continue collecting money from employees’ paychecks.
Fedex will continue collecting payroll taxes from employees, declining the opportunity to delay the tax payments under President Donald Trump’s recent order.
The order, in response to economic turmoil caused by the COVID-19 pandemic, allows employers to defer the withholding and payment of the Social Security portion of payroll taxes for employees from Tuesday through Dec. 31. Employees currently pay a 6.2% Social Security tax on earnings up to $137,700.
The order provides larger take-home pay for employees this year, but the taxes will then have to be paid back early next year for those opting in.
In a statement Wednesday, Fedex said there are still “a number of unanswered questions for businesses and their payroll providers” on how to use the program.
“Fedex plans to continue withholding and remitting employees’ share of Social Security taxes at least until more complete guidance is released by the Internal Revenue Service and Treasury Department,” the company said.
Fedex deferred payment of the employer portion of Social Security taxes through the end of the year, as allowed under the CARES Act, which went into effect March 27. Fedex said in a regulatory filing that the deferral is expected to provide it with an additional $625 million in liquidity in 2020 and 2021.
Fedex Express employed about 245,000 people worldwide as of May.
According to U.S. Treasury Department guidance, Trump’s order applies to employees making a bi-weekly amount of less than $4,000. The deferred taxes must be paid by April 30, “or interest, penalties, and additions to tax will begin to accrue,” the guidance says.
“If necessary, the Affected Taxpayer may make arrangements to otherwise collect the total Applicable Taxes from the employee,” it says.
Trump’s order saw pushback from a coalition of business associations, including the U.S. Chamber of Commerce. In a letter to House Speaker Nancy Pelosi, Senate Majority Leader Mitch Mcconnell and Treasury Secretary Steven Mnuchin, the coalition said the order “creates a substantial tax liability for employees” if Congress does not take action to forgive the tax payments pushed to next year.
“Many of our members consider it unfair to employees to make a decision that would force a big tax bill on them next year,” the coalition wrote. “It would also be unworkable to implement a system where employees make this decision. Therefore, many of our members will likely decline to implement deferral, choosing instead to continue to withhold and remit to the government the payroll taxes required by law.”
Trump’s order says the Secretary of the Treasury “shall explore avenues, including legislation,” to eliminate that obligation to pay back the deferred taxes.
Max Garland covers Fedex, logistics and health care for The Commercial Appeal. Reach him at max.garland@commercialappeal.com or 901-529-2651 and on Twitter @Maxgarlandtypes.