CARES Act FAQ: Payroll Tax Deferral
On March 27th, President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bill contains a variety of provisions, including a deferment of payroll taxes for employers.
Below, we address some of the common questions regarding these tax law modifications. If you cannot find the answer to your question, please do not hesitate to reach out to your HCJ CPAs & Advisors accounting advisor for further assistance.
For whom does the CARES Act provide a payroll tax deferral?
All employers can defer making some Social Security tax payments under the CARES Act.
How much can an employer defer?
Prior to the CARES Act, for 2020, employers were required to pay a 6.2% Social Security tax on the fist $137,700 of wages paid to employees. The CARES Act allows the deferment of any employer Social Security taxes that would be owed for wage payments made between March 12, 2020 and December 31, 2020. So that means an employer can defer 6.2% x any wages of $137,700 or less for each of their employees.
By when does an employer need to make the payments that they defer?
The employer must deposit at least 50% of the taxes by December 31, 2021 and the remainder of the taxes by December 31, 2022.
How do I go about deferring my payroll tax payments?
Employers should work with their payroll provider, payroll department, or payroll software to set up the tax deferrals.
How does the payroll tax deferral operate in connection with the Payroll Protection Program?
It is not currently clear how the PPP exclusion will apply for employers who defer payroll tax payments prior to receiving a loan through the PPP. Further guidance is expected, and we will update this article once information is available.