On Friday, April 10, 2020, the Internal Revenue Service offered some additional guidance to taxpayers who are benefiting from some of the relief provisions of the CARES Act. One such provision allows employers to defer the deposit and payment of the employer’s share of FICA (Social Security taxes) incurred through December 31, 2020. These deposits can be deferred until December 31, 2021 for 50% of the deferred amount and until December 31, 2022 for the remaining amount. The employer’s share of Medicare taxes, employee’s share of FICA and Medicare taxes, and employee federal tax withholding amounts are NOT eligible for deferral and should be timely remitted per the normal deposit schedule.
Prior to Friday’s guidance, it was commonly believed that this deferral was not available for employers who were taking advantage of the forgivable loans offered under the Paycheck Protection Program (PPP). However, the IRS clarified that recipients of PPP loans can defer their share of employment taxes as noted above up to the date that they receive a decision from their lender forgiving the loan. The amounts deferred up to this date can remain so until the due dates mentioned above (December 31, 2021 and 2022).
It should be noted that penalties can be assessed for failure to correctly and timely deposit payroll taxes. It is imperative the rules regarding what portion of payroll taxes can be deferred are fully understood to avoid penalty assessment.
If you would like to learn more about how you or your business can benefit from this guidance please contact your local Blue & Co. advisor.