September 24, 2022

Volume XII, Number 267

Advertisement

September 23, 2022

Subscribe to Latest Legal News and Analysis

September 22, 2022

Subscribe to Latest Legal News and Analysis

September 21, 2022

Subscribe to Latest Legal News and Analysis

IRS Publishes Frequently Asked Questions on Payroll Tax Deferral (US)

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides employers a number of economic relief programs, including deferral of employers’ share of quarterly social security tax deposits and forgivable Payroll Protection Program (PPP) loans.

The IRS recently released a set of frequently asked questions and answers regarding the CARES Act’s deferral of quarterly Social Security tax deposits. The Q&As confirm that no election is necessary for employers to begin deferring deposits, and further state Form 941 will be revised for the second calendar quarter of 2020 (i.e., April – June, 2020) with instructions for how to reflect deferred taxes that were otherwise due for the first quarter of 2020 (i.e., January – March, 2020).

In addition to confirming that no election is necessary and that a revised Form 941 is forthcoming, the Q&As clarify the interaction between PPP loan forgiveness and deferral of payroll deposits. The CARES Act provides that employers who have had a PPP loan forgiven may not defer federal payroll tax deposits, but Q&A 4 states that employers who have applied for and received a PPP loan may continue deferring deposits up until the lender actually forgives the loan. In addition, amounts deferred prior to forgiveness of a PPP loan will continue to be deferred until the “applicable dates” (December 31, 2021 for the first 50% of the deferred tax amount, and December 31, 2022 for the second 50% of the deferred tax amount).

The forgivable amount of a PPP loan is based on how the loan proceeds are used during the first eight weeks following receipt of the loan. Assuming that employers do not begin applying for forgiveness until after the initial eight-week period, employers should have at least eight additional weeks of payroll tax deferral following receipt of a PPP loan. In addition, employers might be able to benefit by delaying applications for PPP loan forgiveness, as delaying forgiveness on a PPP loan could allow additional deferral; on the other hand, the benefit of knowing that the loan has been forgiven may outweigh the marginal benefit of additional tax deferral.

Finally, the Q&As clarify and confirm that self-employed individuals may defer 50% (and only 50%) of their Social Security tax on net earnings. Self-employed individuals should be aware that the other 50% of their Social Security tax is not deferred and could be subject to penalties and interest.

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 105
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Joseph P. Yonadi, Jr. Tax Strategy & Benefits Squire Patton Boggs Cleveland, OH
Partner

Joe Yonadi is a partner in the Tax Strategy & Benefits Practice, where he advises clients on executive compensation, employee stock ownership plans, ERISA fiduciary governance and litigation prevention, and employee benefit and compensation issues in merger and acquisitions.


Joe’s ESOP practice includes advising sellers, lenders and trustees with respect to their ongoing ESOP compliance and fiduciary governance matters. In addition, he assists business owners with assessing the benefits of utilizing an ESOP as a succession planning tool.

Joe maintains a...

216-479-8441
Matthew A. Secrist, Squire Patton Boggs, Employment Lawyer in Cleveland OH
Partner

Matthew Secrist focuses his practice on employee benefits and executive compensation matters. He has experience in a wide range of employee benefits matters, including tax qualified retirement plans, nonqualified deferred compensation plans and arrangements, welfare benefit plans, and COBRA, HIPAA and Patient Protection and Affordable Care Act issues.

He also advises clients regarding compliance with Code Sections 162(m) and 409A. His executive compensation experience includes employee fringe benefit plans, stock option plans, supplemental executive...

216 479 8006
Matthew Van Benschoten Tax Strategy & Benefits Squire Patton Boggs Cleveland, OH
Associate

Matthew “Max” Van Benschoten is an associate in the Tax Strategy & Benefits Practice. During law school, Max interned with various organizations, including a large utility company and the Internal Revenue Service.


Prior to attending law school Max interned as a research analyst for the Arizona House of Representative’s Committee on Ways and Means. During that time, he worked with elected members to analyze proposed tax legislation and presented factual findings to committees and caucuses. His undergraduate studies focused on economics, political science and environmental...

216-479-8744
Advertisement
Advertisement
Advertisement