SPECIAL REPORT: Deferral of Social Security Payroll Tax

In furtherance of our April 2, 2020 Special Report, the CARES Act allows employers to defer paying their portion of the Social Security payroll tax that is, or otherwise becomes, due with respect to wages accrued between March 27, 2020 and December 31, 2020. The deferred amounts must be paid by the applicable dates descried below.

The IRS is revising Form 941, Employer's Quarterly Federal Tax Return, to accommodate a deferral election. The updated Form 941 is expected to be revised for the second calendar quarter of 2020 (April - June, 2020). Information will be provided by the IRS in the near future to instruct employers how to reflect the deferred deposits and payments otherwise due on or after March 27, 2020 for the first quarter of 2020 (January – March 2020).

All employers may defer the deposit and payment of the employer's share of social security tax. However, employers receiving a loan under the Paycheck Protection Program (“PPP”), may not defer the deposit and payment of the employer's share of social security tax due on or after the date that the PPP loan is forgiven. 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 as of March 27, 2020, through the date the lender issues a decision to forgive the loan, without incurring a 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 the 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 below.

The deferred deposits of the employer's share of social security tax must be deposited by the following dates (referred to as the "applicable dates") to be treated as timely and avoid a failure to deposit penalty:

1.      On December 31, 2021, 50 percent of the deferred amount; and
2.      On December 31, 2022, the remaining amount.

For more information regarding the deferral election, the IRS has published the following guide on its website: https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020. 

Please be aware that this information is current as of the date of the release of this Special Report, and the information herein is subject to further changes and modifications by the IRS and other regulatory officials.  If you have any questions or need additional information regarding the deferral of Social Security payroll tax, please contact us.

CONTACT

Andrew J. Annes, Esquire
aannes@satclaw.com
mobile: (312) 246-3110

John W. Campbell, Jr., Esquire
jcampbell@satclaw.com
mobile: (312) 391-3126