Stimulus Program – Delayed Payment of Employer Payroll Taxes
Keeping Workers Paid
Delayed Payment of Employer Payroll Taxes
April 2, 2020
By Matthew E. Miller, CPA, MBA
On Friday, March 27, 2020, Congress passed and the president signed a $2T multi-purpose stimulus package (CARES Act). Over the next several days, we will send out brief one topic newsletters to inform you of important changes to filing and payment dates, as well as, tax law changes effecting the 2019 and 2020 tax years.
The IRS has set up a special Coronavirus page on its website with up to date information.
To read all of our articles on the stimulus package, please visit this page on our website.
Today’s articles will discuss stimulus incentives for business taxpayers.
KEEPING AMERICAN WORKERS PAID AND EMPLOYED ACT
One of the major goals of the CARES Act is to help families by keeping individuals employed. The CARES Act has a number of provisions designed to keep businesses open or to help shuttered businesses reopen.
While there are many provisions we can write about, today we will cover the most important provisions of the Act in two articles:
- Paycheck Protection Program, and
- Delayed Payment of Employer Payroll Taxes.
Here’s a brief summary of the second –
Delay of Payment of Employer Payroll Taxes
In an effort make cash available to business owners for other operating expenses, the CARES Act allows the deferral of the employer portion of social security tax calculated on employee wages for the period beginning January 1, 2020 through December 31, 2020.
The deferred employer payroll taxes are due to the IRS in two annual installments. Fifty percent (50%) is due on December 31, 2021. The remaining fifty percent (50%) is due on December 31, 2022.
Interest will not be due on the deferral.
CAUTION – If you are participating in the Paycheck Protection Program, you are not eligible for this provision.
PLEASE NOTE – The employee portion of social security tax withheld from employee paychecks is due to the IRS in accordance with the employer’s normal payroll tax deposit requirement schedule. These taxes are not eligible for deferral.
PLEASE NOTE – The employer portion of Medicare tax may not be deferred.
This employer payroll tax deferral applies to business entities with employees, not-for-profit organizations, and self-employed individuals.
Self-employed individuals must still submit 50% of the self-employment tax on their self-employment earnings on a quarterly basis. Self-employed individuals may not defer the Medicare portion of self-employment tax.
The ineligibility of businesses to participate in this program if they are participating in the loan forgiveness program under the Paycheck Protection Program makes for some strategic planning challenges.
For employers not participating in the Paycheck Protection Program, we suggest you contact your payroll provider to find out how to participate in this deferral program. If you use a 3rd party payroll provider who submits payroll taxes on your behalf, it is important to have a clear understanding with your payroll provider that they are not to withdraw from your bank account taxes that are deferred to future periods.
For employers participating in the Paycheck Protection Program, continue with the application process for the Paycheck Protection Program. Please monitor our communications for updates on this topic.
If you are self-employed, you may choose to participate in the deferral period, or you may simply continue to pay your self-employment in full tax this year.
We will republish this article as updated information becomes available.
Our wishes to you and your family for your health and safety.