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Here’s how the CARES Act delayed payment of the employer portion of social security payroll tax works including when the deferred installment payments are due.
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Delay of payment of employer payroll taxes

Last Updated: 5/26/2020

 

Typically, as a small business owner, you collect the 6.2% of your employees’ wages for Social Security Tax as part of FICA withholdings up to a maximum wage base limit. And then you match each employee’s contribution dollar-for-dollar as part of your payroll taxes.

 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed on March 27, 2020, allows employers (and self-employed individuals) to delay paying their portion of that social security payroll tax.

 

The deferral period began as soon as the bill became law, and payments may be made in two installments to the Treasury Department:

 

  • 50% until December 31, 2021
  • Remainder until December 31, 2022

This legislation also applies to the corresponding portion of self-employment taxes.

 

Keep in mind that the delay of payments is optional.

 

Can an employer who’s getting a PPP loan defer payment of the employer’s share of social security tax without incurring penalties?

Employers who have received a PPP loan, but whose loan has not yet been fully or partially forgiven, may defer — without incurring failure to deposit and failure to pay penalties — their payment and deposit of the employer’s share of social security tax that otherwise would be required to be made beginning on March 27, 2020.

 

The IRS has stated that a company can continue to defer the 6.2% employer share of Social Security payments owed as of March 27, 2020 through the date the lender issues a decision to forgive the loan. Once loan forgiveness notice is received, the employer cannot defer additional amounts. For example, if you received your loan on April 20, 2020 and it is forgiven on July 1, 2020, no additional amounts can be deferred after July 1, 2020. However, the deferred amount continues to be deferred and due on the dates outlined above.

 

Read more about how this works in our explanation of the Payroll Protection Program.

 

Which employers may defer deposit and payment of the employer’s share of social security tax without incurring penalties?

All employers may defer the deposit and payment of the employer’s share of social security tax. However, employers that receive a loan under the Paycheck Protection Program may not defer the deposit and payment of the employer’s share of social security tax due on or after the date that the PPP loan is fully or partially forgiven under the CARES Act.

 

More detailed guidance about delaying Social Security tax deposits and payments is available through the IRS.

 

This article will be updated as the Treasury Department issues new guidelines including how to make the deferred payments. For additional information about CARES and FFCRA, please visit our COVID-19 Resource Center.

 

If you have questions about how the CARES Act or FFCRA impacts your business, please consult your legal advisor or tax professional.

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