Delay of payment of employer payroll taxes

Last Updated: 6/5/2020

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?

Yes. The Paycheck Protection Program Flexibility Act (PPPFA) updates the original guidance here. Before, if an employer received PPP loan forgiveness, they would have needed to stop deferring immediately. Now, employers who received a PPP loan may delay their payment and deposit of the employer’s share of social security tax beginning on March 27, 2020 that otherwise would have been required.  Employer payroll taxes may remain deferred until December 31, 2020.

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.