As we all know, the Coronavirus Aid, Relief and Economic Security Act, or commonly known as CARES Act, was signed into law at the end of March 2020. The Act offered different types of loans and incentives to businesses impacting payroll tax credits, operating loss deductions, and payroll tax deferment. All companies are eligible for loans and incentives. With that said, more and more questions are emerging on the topic of payroll tax deferrals.
The CARES Act allows employers to defer specifically the employer contribution of FICA (Federal Insurance Contributions) taxes. The keyword here is deferral. These taxes are not forgiven and must be paid back before the end of 2022 (see due dates listed below). Please note, the deferral only applies to payments or deposits made between March 27, 2020, and December 31, 2020. As stated above, the Act only allows businesses to defer FICA taxes. Taxes such as social security tax and Medicare are not deferrable.
If you choose to defer your payments, 50% of the deferred amount must be paid prior to December 31, 2021, and the remaining 50% is due before December 21, 2022.
Here at ShoreSource Business Solutions, we see more and more businesses becoming frustrated with their tax liability increase due to opting into this deferral program. If this is you, please note you do not need to proceed with this tax deferral. You can opt-out of the deferral and continue to pay the payroll tax payments as usual. If you are interested in deferring your tax payments, we encourage you to reach out to your trusted advisors – Bookkeeper, Accountant, or Financial Advisors. The IRS has stated they will revise the Employer’s Quarterly Federal Tax Return for the months we were affected by COVID-19 (April 2020 – June 2020). Again, very important that you communicate with your trusted Advisors on this matter as more and more information is being, or will be, released by the IRS in the coming year.
Are you interested in learning more about ShoreSource Business Solutions, LLC? Feel free to reach us at 843.729.2961 or firstname.lastname@example.org.