The Coronavirus Aid, Relief, and Economic Security (CARES) Act became law on March 27, 2020, providing financial assistance to businesses and individuals impacted by the COVID-19 pandemic. The CARES Act does allow taxpayers to defer paying the employer portion of the social security taxes through the end of 2020.
Does my business qualify to defer the Employer Payroll Tax Payments?
In general, all employers, both businesses and non-profits, are eligible to defer their payroll taxes, unless they receive loan forgiveness under the SBA Paycheck Protection Program.
Until when can employers defer payment of payroll taxes?
Employers may defer payment of the employer share of payroll taxes owed on wages paid for the period ending December 31, 2020, through the end of 2020.
The deferred payroll taxes are due in two installments:
- 50% of the deferred amount to be paid by December 31, 2021;
- Remaining 50% of the deferred amount to be paid by December 31, 2022.
Is the deferral applicable for self-employed individuals?
Yes. The relief is also applicable to self-employed individuals, as in the case of employers.
The payment of employer portion of any self-employment taxes attributable to Social Security for the period ending December 31, 2020, maybe deferred and paid in two installments: 50% by December 31, 2021, and 50% by December 31, 2022.
Is the deferral applicable restricted to the employer portion of all payroll tax components?
The payroll tax deferral applies only to the employer’s portion of Social Security tax. It does not apply to federal income tax withholding, Medicare tax, or the employee’s portion of Social Security tax.
Deferral of the employer payroll tax applies to the following:
- Employer’s share of Social Security Tax.
- Portion of the employer’s and employee representative’s share of Tier 1 Railroad Retirement Tax Act (RRTA) tax under IRC Sections 3211(a) and 3221(a).
- For self-employed individuals, the equivalent amount of Self-Employment Contributions Act (SECA) tax due on net earnings from self-employment under IRC Section 1401(a).
How about employers remitting payroll taxes through an agent or a CPEO?
Payroll tax deferral is available for employers remitting payroll taxes through an agent under IRC Section 3504 or a certified professional employer organization (CPEO). The employer can direct the agent or CPEO to defer the applicable tax payments.
The employers will be solely liable for making the deferred payments in two installments:: 50% by December 31, 2021, and 50% by December 31, 2022.
Where can I find more information on the Employer Payroll Tax Payments and other COVID-19 economic relief efforts?
More information on the deferral of employer payroll tax payments can be found on the IRS’s website at https://www.irs.gov/coronavirus.