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CARES Act Deferral of Employment Tax Deposits

Posted by Admin Posted on Apr 25 2020

Who is eligible to defer employment tax deposits?

  • All employers are eligible.
  • The ability to defer deposit and payment of employment taxes applies to all employers, whether or not the employers are entitled to Families First Coronavirus Relief Act (FFCRA) paid leave credits and CARES Act employee retention credits.
  • No special election is required.
     

What employment taxes and deposits may be deferred?

  • The employer’s share of social security tax or 50% of the social security tax on net earnings from self-employment income (collectively “employment tax”) may be deferred.
  • The deferral applies to deposits and payments of employment tax required to be paid during the period beginning March 27, 2020 and ending December 31, 2020.
  • Form 941 will be revised for the second quarter of 2020.  The IRS indicates it will provide instructions soon regarding how to report deferrals for the first quarter of 2020.
  • For self-employed individuals, the deferral applies to employment tax included in estimated tax payments due during the period beginning March 27, 2020 and ending December 31, 2020.

 

When is the deferred employment tax required to be deposited (applicable dates)?

  • 50% of the deferred amount must be deposited on or before December 31, 2021.
  • The remaining 50% must be deposited on or before December 31, 2022.

 

What is the effect of a Payroll Protection Plan (PPP) loan on the deferral?

  • Employers that have received a PPP loan, but whose loan has not yet been forgiven, may defer employment tax as described above.
  • When an employer receives the lender’s decision that the PPP loan is forgiven, employment tax due after that date may not be deferred.
  • The amount of employment tax deferred through the date the PPP loan is forgiven continues to be deferred and due on the applicable dates.

 

What are the effects of FFCRA paid leave credits and CARES Act employee retention credits on the deferral?

  • An employer may defer employment tax as described above prior to determining:
    •     If the employer is entitled to FFCRA paid leave credits or the CARES Act employee retention credit
    •     AND prior to determining the amounts of:
      •         Employment tax deposits that the employer may retain for these credits,
      •         Amount of advance payments of these credits, OR
      •         Amount of refunds of these credits.