In accordance with sections 2302 (a) and (a) (2) of the CARES Act, employers may defer payments from the employer`s share of the social security tax due during the period of “wage tax deferral” and the payment of tax on wages paid during that period. The wage tax deferral period begins on March 27, 2020 and ends on December 31, 2020. Wage deferral contractsThe wage deferral agreements are already making headlines: large national companies announce a salary reprieve among their senior managers in order to strengthen the company`s cash position. Wage deferral schemes could highlight technical problems within the meaning of Section 409A of the Internal Revenue Code (Section 409A), which severely limits the ability of executives to defer salaries unless strict requirements are met. The deferral allowance to later in the same tax year (or until March 15 of the following fiscal year) is not contrary to Section 409A of the Internal Income Code, but requires a written salary deferral agreement. In France, for example, as in many Eu-Eu Member States, trade unions are reflexively opposed to benefit cuts and wage changes require negotiations with a reluctant union to amend a collective agreement on allowances or benefits. The same is true wherever the collective labour agreement (CPA), created in 2017 by the Macron administration, is in force. But with a CPA, if the union accepts the change, any employee who refuses the change can be fired with the cause. In practice, the CPA authorizes the company to ensure that all employees are subject to a reduction in pay or working time, without the need for their individual consent, provided that a successful negotiation can be conducted with union representatives. As a general rule, a taxpayer who has deferred payment of the employer`s share of the social security tax or 50% of the social security tax on net income from unpaid work under Section 2302 of the CARES Act is not entitled to make a refund on the basis of the deferral, since the deferral is an adjournment and not a deferral of liability. Therefore, the deferral itself does not result in overpayment of taxes on Form 1040. However, if a household employer is entitled to prepaid leave credits under the FFCRA and declares these credits on Schedule H Form 1040, the insured may be reimbursed for paid leave credits, even if he defers the employer`s share of the social security tax. This does not apply to sick leave and family leave credits of an equivalent amount for the self-employed.
In the event that the wage change would result in an employee being wrongly considered tax-exempt or non-tax-exempt, the company can expect severe penalties for the error.