In addition to an employee retention credit and advance payment of payroll credits for employee paid sick and family leave, the CARES Act also provides for extra time to pay certain payroll taxes.
Employers and self-employed individuals may defer payment of all (in the case of employers) or half (in the case of self-employed individuals) of the employer share of the Social Security portion of FICA taxes incurred during the period beginning on March 27, 2020 and ending on December 31, 2020.
As a reminder, FICA tax has two components, the 6.2% Social Security tax (old-age, survivors and disability insurance); and 1.45% Medicare tax (hospital insurance tax).
The extended deadline for the payroll tax deferral period is as follows:
• 50% of the deferred payroll taxes are due on December 31, 2021; and
• the remaining 50% is due on December 31, 2022.
An employer will be treated as having timely made all deposits of applicable employment taxes during the payroll tax deferral period if all deposits are made not later than the applicable due dates.
The deferral does not apply to any taxpayer who has had debt forgiven under the Paycheck Protection Program or other provision of the CARES Act. For more information, refer to IRS Notice 2020-22.