The IRS has issued much-anticipated guidance on the payroll tax deferral component of the CARES Act, which allows companies to defer payment on the company match of the Social Security tax (6.2%) for company payroll for March 27 through December 31. The first 50% of this deferral will need to be paid back by Dec. 31, 2021 and the remaining 50% paid back by Dec. 31, 2022. Thus, this tax deferral can be viewed as a two-year, interest-free loan that gives companies immediate liquidity.
Under the new guidance, companies that have received a PPP loan, but whose loan has not yet been forgiven, may defer deposit and payment of the employer’s share of Social Security tax that otherwise would be required to be made beginning on March 27 through the date the lender issues a decision to forgive the loan without incurring failure to deposit and failure to pay penalties. Click here for additional details.