The IRS has issued FAQs on the deferral of the deposit and payment of employment taxes that is provided by the CARES Act on it’s website.
Sect 2302 of 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.
It also contains several new Small Business Administration loan and debt relief programs, including the Paycheck Protection Program, Economic Injury Disaster Loans and SBA debt relief, for self-employeds, independent contractors, and small and large businesses suffering economic damage from the coronavirus (COVID-19) outbreak.
Additionally, employers paying qualified sick leave wages and qualified family leave wages required by the Families First Coronavirus Response Act as well as qualified health plan expenses allocable to Qualified Leave Wages, are eligible for refundable tax credits.
We are sure all of that leaves you with many, many questions.
What deposits and payments of employment taxes are employers able to defer?
What may be deferred under the CARES Act are the taxes imposed under Code Sec. 3111(a) and, for Railroad employers, so much of the taxes imposed under Code Sec. 3221(a) as are attributable to the rate in effect under Code Sec. 3111(a) (collectively referred to as the “employer’s share of social security tax”).
But there is a caveat here.
When an employer’s Paycheck Protection Program loan is forgiven, the employer can no longer defer deposit and payment of the employer’s share of social security tax due.
Anything prior to that date is still deferred, and will be due on the applicable dates.
When can employers start deferring deposit and payment of the employer’s share of social security tax without incurring penalties?
The short answer is beginning March 27, 2020 through December 31, 2020.
Quarterly returns will be revised after the second quarter. Employers will be provided with more information at that time.
Under no circumstances will employers be required to make a special request to defer.
Which employers may defer deposit and payment of the employer’s share of social security tax without incurring penalties?
All employers may defer. Period.
What about if an employer applied for PPP, but their loan isn’t yet forgiven. Can they defer too?
Yep. 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 social security tax.
(go back up to question #1 for a little more on this)
Is this ability to defer deposits of the employer’s share of social security tax in addition to the Families First Coronavirus Relief Act paid leave credits and the CARES Act employee retention credit?
Yes. The ability to defer deposit and payment of the employer’s share of social security tax under the CARES Act applies to all employers, not just employers entitled to paid leave credits and employee retention credits.
Can an employer who is eligible to claim refundable paid leave tax credits or the employee retention credit defer its deposit, but is unsure of the amounts that they may be eligible for still defer?
Yes. An employer is entitled to defer deposit and payment of the employer’s share of social security tax prior to determining whether the employer is entitled to the paid leave credits.
Deferred deposits imply that there is a time when the deposits must be made. What are those dates?
The deferred deposits of the employer’s share of social security tax must be deposited by the following dates to be treated as timely (that means no penalty).
50% of the deferred amount must be paid on or before December 31, 2021.
The balance is due by December 31, 2022.
What about the self-employed, can they defer too?
Same rules and dates apply.