IRS Issues Clarification FAQs for deferred employer tax deposits and payments allowed by the CARES Act

The IRS has clarified several details regarding the deferral of Employer’s Social Security tax, a provision included in the CARES (Coronavirus Aid, Relief, and Economic Security) Act enacted March 27, 2020. The payroll tax deferral period begins on March 27, 2020 and ends December 31, 2020.

This list of frequently asked questions provides much-needed clarification in several areas – for both employers and self-employed individuals. They also clarify deferral options if an employer receives a PPP loan.  

We encourage you to look at this link, as the page will be updated regularly. The most recent update on April 15, 2020 answers the following questions.

• What deposits and payments of employment taxes are employers entitled to defer?
• When can employers begin deferring deposit and payment of the employer’s share of social security tax without incurring failure to deposit and failure to pay penalties?
• Which employers may defer deposit and payment of the employer’s share of social security tax without incurring failure to deposit and failure to pay penalties?
• 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?
• Is this ability to defer deposits of the employer’s share of social security tax in addition to the relief provided in Notice 2020-22 for deposit of employment taxes in anticipation of the Families First Coronavirus Relief Act (FFCRA) paid leave credits and the CARES Act employee retention credit?
• Can an employer that is eligible to claim refundable paid leave tax credits or the employee retention credit defer its deposit and payment of the employer’s share of social security tax prior to determining the amount of employment tax deposits that it may retain in anticipation of these credits, the amount of any advance payments of these credits, or the amount of any refunds with respect to these credits?
• What are the applicable dates by which deferred deposits of the employer’s share of social security tax must be deposited to be treated as timely (and avoid a failure to deposit penalty)?
• What are the applicable dates when deferred payment of the employer’s share of social security tax must be paid (to avoid a failure to pay penalty under section 6651 of the Code)?
• Are self-employed individuals eligible to defer payment of self-employment tax on net earnings from self-employment income?
• Is there a penalty for failure to make estimated tax payments for 50 percent of social security tax on net earnings from self-employment income during the payroll tax deferral period?
• What are the applicable dates when deferred payment amounts of 50 percent of the social security tax imposed on self-employment income must be paid?

Your CKCO advisors are here to help you navigate through these unique circumstances.