IRS Releases Guidance Regarding Deferral of Employer Payroll Taxes Under the CARES Act
The IRS has released on its website guidance instructing taxpayers on how to defer the deposit of employer payroll taxes as allowed by section 2302 of the CARES Act.
Among the key takeaways:
- The deferral applies to the FICA portion of employer payroll taxes only; it does not apply to the Medicare portion of employer payroll taxes.
- Deferral of the deposit of employer payroll taxes is permitted beginning March 27, 2020.
- The IRS will revise the second quarter Form 941 to reflect the deferral process. Additional guidance will be forthcoming regarding the handling of employer payroll tax deposits due between March 27, 2020 and March 31, 2020.
- Recipients of a Paycheck Protection Program Loan who anticipate applying for and receiving loan forgiveness may defer the deposit of payroll taxes due between March 27, 2020 and the date loan forgiveness is granted.
- The guidance includes information on the interaction of the deferral of employer payroll taxes with the paid leave employment tax credits under the Families First Coronavirus Response Act and the employee retention credit provided by the CARES Act.
- The guidance confirms that persons subject to self-employment tax (which includes ministers) may defer 50% of the Social Security tax portion of their SECA tax payments. The Social Security tax portion is the first 12.4% of the 15.3% SECA tax. Thus, an amount equal to 6.2% (50% of 12.4%) of a taxpayer’s net earnings from self-employment may be deferred.