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Employers, here’s what to know about repayment of deferred payroll taxes

Posted on April 19, 2021

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) allowed employers to defer payment of the employer’s share of Social Security tax to provide companies a needed temporary financial boost.

Acting in tandem with the CARES Act, IRS Notice 2020-65 provided the means for employers to defer withholding and payment of the employee’s Social Security taxes on certain wages paid in calendar year 2020. Employers must, however, pay back these deferred taxes by their applicable dates.

Who was eligible? The employee deferral applied to people making less than $4,000 in wages every two weeks (or an equivalent amount for other pay periods.) Although the program was optional for most employers, it was mandatory for federal employees and military service members.

Repayment schedule:

  • Repayment of the employee’s portion of the deferral started Jan. 1, 2021 and continues through Dec. 31, 2021.
  • The employer should send repayments to the IRS as they collect them.
  • If the employer does not repay the deferred portion on time, penalties and interest will apply to any unpaid balance.
  • Employees should see their deferred taxes in their withholdings pay statements. They can also check with their organization’s payroll office for details.

How to repay deferred taxes:

  • Employers can make deferral payments through the Electronic Federal Tax Payment System.
  • Payments can also be made by credit or debit card, money order, or by check.
  • These payments must be separate from other tax payments to ensure they are applied to the deferred payroll tax balance. In fact, IRS systems won’t recognize the payment if it is made with other tax payments or sent as a deposit.
  • EFTPS will soon have a new option to Select Deferral Payment. Employers can visit gov, or call 800-555-4477 or 800-733-4829 for details.

What if the employee no longer works for your organization? Employers are responsible for repayment of the entire deferred amount regardless of the employees present employment status with your company. The employer must collect the employee’s portion using their own recovery methods.

Teipen CPA Group can help your small-to-medium sized business make sense of this CARES program as it applies to your particular business needs.