The Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law on March 27 provides a variety of aid to businesses and individuals to help lessen the economic impact of the COVID-19 global pandemic. One challenge that taxpayers may face during this crisis is managing their cashflow; specifically, taxpayers may have a difficult time making certain tax payments and deposits while their income is significantly reduced. Section 2302 of the CARES Act allows employers and self-employed individuals to delay payment of certain employment taxes. For the period March 27 through December 31, 2020, employers can delay payment of their share of Social Security tax, and self-employed individuals can delay payment of 50% of the Social Security portion of their self-employment tax when making their estimated tax payments. The deferred amounts can be paid back in two installments: 50% being due by December 31, 2021, with the remainder due by December 31, 2022.
Taxpayers that have had a Paycheck Protection Program (PPP) loan forgiven are not eligible to defer their employment tax deposits under this provision. Recent guidance from the IRS has clarified that until the loan is actually forgiven by the lender, PPP loan recipients may defer their employment tax payments as described above. Once PPP loan forgiveness is secured, deferral is no longer allowed. The repayment schedule is not affected by PPP loan forgiveness.
For more information, click here for the IRS FAQ or contact Boulay for guidance on this and other provisions of the CARES Act.