As part of the CARES act, small businesses and self-employed individuals can defer payments of the 6.2% social security payroll tax. You are able to defer these taxes for the period beginning on March 27th and ending on December 31, 2020. However, if you receive a loan through the Payroll Protection Program, your eligibility period to defer taxes ends when the loan is forgiven. So, employers that have loans forgiven under PPP are no longer eligible for the social security tax deferral. Although the loan forgiveness triggers the end of your eligibility period, you still have until the deadlines listed below to pay the deferred taxes.
Note that these payments are deferred but remain due and payable. You should keep track of the amount deferred on your balance sheet and make plans for making the required payments when they become due. The deferred payroll tax payments are due as follows:
December 31, 2021 – 50% of the deferred amount due
December 31, 2022 – remaining 50% balance due
If you use payroll provider Gusto (which we highly recommend) and would like to take advantage of this tax deferral option, you’ll find a link on the Gusto website to the deferral opt-in page.
The deferral of the social security portion of payroll tax is not mandatory, and employers can opt to not use this deferral.
Check out our COVID-19 resource page for more blog posts, videos and helpful information for businesses during the Coronavirus pandemic.