Deferred Payroll Taxes for Employers Due to COVID-19 Pandemic
- Find out which payroll taxes are applicable.
- Find out how long the deferral period lasts.
- Learn more about payback times and amounts.
- Find out how deferred payroll taxes affect self-employed individuals.
- Get the scoop on how SBA Loan Forgiveness affects deferred payroll taxes.
- Get due dates for payments if the monthly deposit rule applies to you.
One of the benefits included in the COVID-19 pandemic stimulus package is the ability for an employer to defer payment of the employer’s share of certain federal payroll taxes. This is welcome relief to business owners, and Fiducial has the scoop on how it works! Visit Fiducial’s Coronavirus Update Center for more information on Federal and State Tax Updates as well as emergency relief services.
The basics of deferred payroll taxes
Here’s what you need to know about deferred payroll taxes in a nutshell.
- The deferral applies to the employer’s 6.2% share of the Social Security (OASDI) payroll tax. But, the deferral does not apply to the employer’s 1.45% share of the hospital tax. The deferral is optional, applies to employers of any size and applies to wages paid between March 27, 2020 and December 31, 2020.
- Deferred payments will be due in this way: 50% before December 31, 2021 and the balance before the end of 2022.
- For self-employed individuals, the deferral applies to 50% of the self-employment tax liability (including any related estimated tax liability).
What else do business owners need to know?
Something else businesses should know? Employers who receive Small Business Administration loans that are forgiven under the CARES Act (so that the Federal government effectively gave the employers loan funds that they did not have to repay in order to fund as much as eight weeks of their payroll costs) are not eligible for deferred payroll taxes. However, after that eight-week period is complete, deferral may resume.
Also, if you are an employer and the monthly deposit rules apply, May 15 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for April 2020. This is also the due date for the non-payroll withholding deposit for April 2020 if the monthly deposit rule applies.
Under the Cares Act, employers…
- Can take advantage of deferred payroll taxes by paying the employer’s 6.2% portion of the Social Security taxes through the end of 2020. The delay provisions apply to all employers regardless of the number of the employer’s employees.
- Are able to retain enough of the federal income tax withholding of each employee who received mandatory COVID-19 sick and family leave payments and both the employer’s and employee’s share of social security tax deposits, as well as the employer’s share of Social Security and Medicare taxes with respect to all employees, to reimburse themselves for mandatory COVID-19 sick and family leave payments.
- Are able to retain the employer’s 6.2% portion of the Social Security taxes (and equivalent RR retirement amounts) to reimburse themselves for keeping employees on payroll under the Employee Retention Credit.
For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more. Need more information about the CARES Act or deferred payroll taxes? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!