On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law after the legislation was passed with bipartisan support in the U.S. Senate and House of Representatives. The CARES Act includes substantial relief and stimulus benefits for individuals and businesses impacted by the Coronavirus (“COVID-19”) crisis. The following is a summary of the Payroll Tax provisions included in the CARES Act. These new provisions are in addition to the payroll tax credits provided as part of the Families First Corornavirus Response Act (“FFCRA”).
Employee retention credit for employers subject to closure due to COVID-19
The provision provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to
employers, including non-profits whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50% when compared to the same quarter in the prior year.
The credit is based on qualified wages paid to the employees who are furloughed or face reduced hours as a result of their employer’s closure or economic hardship. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
Wages do not include those taken into account for purposes of the payroll credits for required paid sick leave or required paid family leave, nor for wages taken into account for the employer credit for paid family and medical leave pursuant to provisions of the FFCRA.
This credit is not available to employers receiving assistance through the Paycheck Protection Program.
Delay of payment of employer payroll taxes
The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid in two equal installments over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision.
Payroll taxes that can be deferred include the employer portion of FICA taxes, the employer and employee representative portion of Railroad Retirement taxes (that are attributable to the employer FICA rate), and half of SECA tax liability.
Deferral is not provided to employers receiving assistance through the Paycheck Protection Program.
Please call or email your Tronconi Segarra & Associates advisor or email our Response Team at to discuss the Payroll Tax provisions of the CARES Act or the FFRCA or other COVID-19 relief measures being implemented by Federal, State and Local authorities.