The CARES Act allows employers to defer the deposit and payment of the employer’s share of social security taxes and self-employed individuals to defer payment of certain self-employment taxes. Previously, an employer that received a PPP loan was not permitted to defer deposit and payment of the employer’s share of Social Security tax after the receipt of the lender’s decision forgiving all or portion of the employer’s PPP loan. However, IRS updated a list of FAQs on June 26, 2020, allowing an employer that receives a PPP loan is entitled to defer the payment and deposit of the employer’s share of social security tax, even if the loan is forgiven.
As many of the employers are getting ready to file the calendar year Q2 payroll tax reports, the employers should consider their cash positions and consider making election to defer making their share of payroll taxes.
Under the CARES Act, business may delay paying the employer portion of the social security payroll taxes on wages paid for the period from March 27, 2020 through December 31, 2020. Any 2020 deferred payroll tax amount would be due to the government in installments: 50% at the end of 2022 and the remaining at the end of 2022.
Please consult with your payroll tax compliance service provider if you would like to consider this tax deferral option.