The IRS has just published guidance in the form of Frequently Asked Questions, on the deferral of employment tax deposits and payments through December 31, 2020 for employers, including those that receive a Paycheck Protection Program (PPP) loan.
The CARES Act provides for a deferral of the deposit and payment of the employer’s portion of social security taxes otherwise due for the period beginning on March 27, 2020 and ending December 31, 2020. 50% of the deferred taxes are due December 31, 2021 and the balance is due December 31, 2022. Employers may begin deferring deposit and payment of the employer’s share of social security tax during the period beginning on March 27, 2020 without incurring penalties or interest. Employers are not required to make a special election in order to take advantage of this deferral.
The IRS will provide information in the near future instructing employers how to reflect the deferred deposits and payments for the first quarter of 2020. Form 941, Employer’s Quarterly Federal Tax Return, will be revised for the second calendar quarter of 2020.
Employers who have applied for a PPP loan or received a PPP loan that is not yet forgiven, may defer deposit and payment of their share of social security tax without penalties until the time that the employer receives a decision from its lender that the PPP loan is forgiven.
The amount of the payroll taxes previously deferred through the date that the loan is forgiven continues to be deferred, and is due on December 31, 2021 and December 31, 2022, as described above.
As a reminder, self-employed individuals may defer payment of 50% of the 12.4% portion of self-employment tax on net earnings from self-employment income for the period beginning on March 27, 2020 and ending December 31, 2020. For 2019, the amount used to calculate the installments of estimated tax due will be reduced by this amount.