IRS responds to CARES Act provision allowing employers to defer Social Security taxes
The IRS released an FAQ on April 10 related to the provision in the CARES Act that allows employers to defer the employer portion of Social Security taxes payable on wages paid to employees from March 27, 2020 through December 31, 2020. The deferred payroll taxes become partially payable on December 31, 2021 (50%) and December 31, 2022 (50%). The benefit does not apply to employers who obtain a Payroll Protection Program Loan AND have any portion of that loan forgiven. It was unclear whether the deferral would be allowed to employers who obtain a Payroll Protection Loan but have not yet had any portion of that loan forgiven. The IRS addresses that question in FAQ #4:
- Can an employer that has applied for and received a PPP loan that is not yet forgiven defer deposit and payment of the employer’s share of social security tax without incurring failure to deposit and failure to pay penalties?
Yes. 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 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 in accordance with paragraph (g) of section 1106 of the CARES Act, without incurring failure to deposit and failure to pay penalties. 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 social security tax due after that date. However, the amount of the deposit and payment of the employer’s share of social security tax that was deferred through the date that the PPP loan is forgiven continues to be deferred and will be due on the “applicable dates,” as described in FAQs 7 and 8.
Contact a Dugan & Lopatka professional at firstname.lastname@example.org or (630) 665-4440 if you have specific CARES Act provision. View additional questions regarding the other IRS FAQ’s.