The CARES Act allows all employers to defer the deposit and payment of the employer’s share of social security (SS) taxes (6.2%) and self-employed individuals to defer payment of certain self-employment taxes. The timing of the deferral will depend on whether or not the employer receives a loan under the Payroll Protection Program.
In general, employers may defer the deposit and payment of the employer’s portion of Social Security taxes during the period beginning on March 27, 2020 and ending December 31, 2020 without incurring failure to deposit and failure to pay penalties. This applies to all employers regardless of the size of the company.
We want to take a moment to clarify how the deferred payroll taxes will apply to those that have received a loan under the Payroll Protection Program (PPP):
- Employers that receive a loan under PPP may NOT defer the deposit and payment of the employer’s share of SS tax due on or after the date that the PPP loan is forgiven. This clarification/expansion is important because it was previously unclear whether employers that applied for/received a PPP loan could defer the deposit and payment of any portion of its share of SS tax.
- Employers who have received a PPP loan, but whose loan has not yet been forgiven, may defer deposit and payment of the employer’s share of SS tax that otherwise would be required to be made beginning on March 27, 2020, through the date the lender issues a decision to forgive the loan. Once an employer receives a decision from its lender that its PPP loan is forgiven, the employer is no longer eligible to defer deposit and payment of the employer’s share of SS tax due after that date.
Regardless of PPP loan status, the deferred deposits of the employer’s share of SS tax must be deposited by the following dates:
- On December 31, 2021, 50% of the deferred amount; and
- On December 31, 2022, the remaining amount (i.e., the other 50%).
If you have additional questions or need further guidance, please contact your LB Carlson representative.