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CARES Act - Payroll Tax Deferral

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Payments of certain payroll taxes can be delayed.

  1. Employers may defer payment of 50% of the employer’s social security tax deposit that would normally be required to be paid between March 27, 2020 and December 31, 2020.
    1. This is the 6.2% employer portion of the FICA tax paid by the employer (941 payment). Note: The employer pays 6.2% social security tax on the first $137,700 of an employee’s wages during 2020.
    2. The employee portion and the federal income taxes withheld are not subject to the deferral.
    3. The deferred amount is required to be repaid 50% by December 31, 2021 and 50% by December 31, 2022 to avoid penalties.
    4. Any deferred amounts paid by the due dates will not be subject to penalties and interest.
    5. There is not a dollar limit on the amount of wages eligible for this deferral.

  2. Payroll taxes paid by an employer through an agent or through a certified professional employer organization (CPEO/Leased Employees) are eligible.
    1. Employers will have to notify the CPEO of the deferral.
    2. Employers bear liability for making the timely tax deposits to avoid penalties and interest.

  3. Amounts not eligible for the deferral include:
    1. Employee withholdings for any taxes
      1. Employee federal withholding
      2. Employee FICA withholding
    2. Employer paid Medicare (The 1.45% employer portion of the 7.65% FICA tax)
    3. Employer FUTA taxes

  4. Ineligible Taxpayers – Taxpayers who obtain loans through the SBA under the Paycheck Protection Program are not eligible for this deferral.

  5. Self-employed persons are eligible for this deferral relief as well, when filing their personal tax return.

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