The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains immediate payroll tax relief for certain employers. Delaying payment of certain employer payroll taxes is not available to employers who receive debt forgiveness for a loan received under the CARES Act Paycheck Protection Program.
The CARES Act allows a delay in the required deposit of certain employer payroll taxes. Under the Act, an employer may delay the deposit of applicable employment taxes, which includes the employer portion of the OASDI payroll tax (6.2%) or employment taxes related to the Tier 1 Railroad Retirement Act.
A self-employed individual may also delay the deposit of 50% of the individual’s self-employed social security tax liability. An individual’s self-employed social security tax liability eligible for the delay is not subject to the provisions of Internal Revenue Code section 6454 (penalty for underpayment of estimated tax). Accordingly, self-employed individuals will be required to pay the “employee” portion of the self-employed social security tax with their estimated tax payments, but not the “employer” portion.
The taxes for which the deposit may be deferred are the taxes incurred from March 27, 2020 through the end of 2020. Of the taxes to be deferred, 50% of the deferred taxes are required to be deposited by the end of 2021. The remaining 50% are required to be deposited by the end of 2022.
The only limitation, known at this time, on an employer’s ability to defer the payment of employer payroll taxes is an employer that receives debt forgiveness with respect to a loan under the CARES Act Paycheck Protection Program is not eligible for the deferral. Please visit LGT’s COVID-19 Financial Updates page for the latest updates to matters affecting small businesses and individuals.