Carrying on our tradition of providing you with Solutions Beyond the Obvious, we are pleased to bring you our “Ask the Experts” series of articles. In these articles, our Tronconi Segarra & Associates tax experts identify and explain the significant tax changes that were passed as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act which can provide additional relief for businesses and individuals facing economic hardship as the result of the coronavirus pandemic. Contact your Tronconi Segarra & Associates tax advisor for more information about any of the topics discussed in these articles.
Thomas E. Mazurek, Jr., CPA
The CARES Act allows ALL employers to defer the deposit and payment of the employer’s share of Social Security taxes (6.2%) and self-employed individuals to defer payment of certain self-employment taxes beginning on March 27 through December 31, 2020. These are the taxes imposed under section 3111(a) of the Internal Revenue Code (the “Code”) and include certain railroad retirement taxes imposed on Railroad employers under section 3221(a) of the Code, so much as they are attributable to the rate in effect under section 3111(a) of the Code.
Employers are not required to make a special election to be able to defer deposits and payments of these employment taxes. The quarterly payroll tax return (Form 941) will be revised for the second calendar quarter of 2020. Information will be provided by the IRS in the near future to instruct employers how to reflect the deferred deposits and payments otherwise due on or after March 27, 2020 for the first quarter of 2020.
The deferred deposits of the employer’s share of Social Security tax must be paid by the following dates (the “applicable dates”) to be treated as timely (and avoid a failure to deposit penalty):
- On December 31, 2021, 50% of the deferred amount; and
- On December 31, 2022, the remaining amount.
An employer is entitled to defer deposit and payment of the employer’s share of Social Security tax prior to determining whether the employer is entitled to the paid leave credits under sections 7001 or 7003 of FFCRA or the employee retention credit under section 2301 of the CARES Act.
Self-employed individuals may defer the payment of 50% of the Social Security tax on net earnings from self-employment income imposed under section 1401(a) of the Code for the period beginning on March 27, and ending December 31, 2020. The amount of Social Security tax being deferred by a self-employed individual will not be used to calculate estimated tax payments due under section 6654 of the Code.
Paycheck Protection Program
Employers who have received a PPP loan may defer deposit and payment of the employer’s share of Social Security tax that otherwise would be required to be made beginning on March 27, 2020, through the date the lender issues a decision to forgive the loan in accordance with paragraph (g) of section 1106 of the CARES Act, without incurring failure to deposit and failure to pay penalties. Once an employer receives a decision from its lender that its PPP loan is forgiven, the employer is no longer eligible to defer deposit and payment of the employer’s share of Social Security tax due after that date. The amount of the deposit and payment of the employer’s share of Social Security tax that was deferred through the date that the PPP loan is forgiven continues to be deferred and will be due on the “applicable dates.”
See Deferral of employment tax deposits and payments through December 31, 2020 on the IRS website for more information.
Please contact your Tronconi Segarra & Associates tax advisor for more information on this or any tax matter. If you do not have a Tronconi Segarra & Associates tax advisor, please call 716.633.1373 or Contact Us through our website with your question.
This article has been prepared for general guidance on matters of interest only; it does not constitute professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy of completeness of the information contained in this article; and, to the extent permitted by law, Tronconi Segarra & Associates LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.