Under the CARES Act, employers are allowed to defer the deposit and payment of the employer’s share of social security taxes (6.2% on employee wages) and self-employed individuals to defer payment of certain self-employment taxes. The deferral period begins March 27, 2020 and ends on December 31, 2020 and is designed to help keep cash in businesses to help them. 50% of the deferred payroll taxes will be due on December 31, 2021, and the remaining 50% will be due on December 31, 2022.
The Act also provided that this deferral does not apply to any taxpayer which had indebtedness forgiven as part of the Paycheck Protection Program (PPP), but did not explain if a business could defer the employer’s share of social security taxes until the date the loan is forgiven.
On April 10, 2020, the IRS issued 11 Q&As providing guidance on the deferment of employment tax deposits. A businesss that has applied for a PPP loan may defer employer’s share of social security tax deposits due beginning on March 27, 2020 through the date the lender issues a decision to forgive the loan.
With this new clarification, we are advising and working with clients to defer their employer’s share of social security tax to help with cash flow. If you have questions or need assistance, we are here to help. Reach out to your WR Partner or your relationship manager.
WR Tax Team