PAYROLL TAX DEFERRAL – CARES ACT

Pursuant to the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), employers and self-employed individuals are able to delay the deposit of certain employment taxes.

• The payroll tax deferral period applies to applicable employment taxes for the period beginning March 27, 2020 and ending before January 1, 2021
• For employers, applicable employment taxes include the employer’s share of Social Security taxes
• For self-employed individuals, applicable employment taxes include the equivalent of the employer’s Social Security taxes
• The employer’s portion of Social Security tax is 6.2% of wages, compensation, or net earnings from self-employment, up to the 2020 wage base of $137,700 (maximum deferral is $137,700 x 6.2% = $8,537 per employee, per self-employed individual)
• Half of the applicable employment taxes required to be deposited during the payroll period must be deposited on or before December 31, 2021
• The remaining half of the deferred applicable employment taxes required to be deposited during the payroll period must be deposited on or before December 31, 2022
• The CARES Act requires that the employer, not the payroll service provider, is responsible for ensuring the deferred payroll tax is remitted timely by the applicable deferral date.  Therefore, any employer using a third-party payroll provider or agent should work closely with the payroll provider or agent to implement the program
• Employers or self-employed individuals that receive a loan under the Small Business Administration Act, as provided in section 1102 of the CARES Act (the Paycheck Protection Program (PPP)), may not defer the deposit and payment of the employer’s share of Social Security tax due after receiving a decision from the lender that the PPP loan is forgiven under the CARES Act

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