Payroll and SE Tax Payment Delay Now Allowed with PPP loans
The CARES Act included a provision for deferred payment of Social Security taxes, but the relief was not available to taxpayers with debt forgiveness under certain loans with the Small Business Act. The June 2020 Paycheck Protection Program (PPP) Flexibility Act expands the relief to taxpayers with a PPP loan, even if the loan is forgiven in 2020.
Employers can choose to defer paying the employer portion of Social Security taxes and eligible self-employed individuals can defer 50% of their self-employment tax based on 12.4% of self-employment income through December 31, 2020. 50% of the amounts due must be paid by December 31, 2021, and the remaining 50% by December 31, 2022. Applicable employment taxes eligible for deferral do not include Medicare taxes.
If an employer is part of a PEO or CPEO and directs that company to defer payment of any applicable employment taxes during the payroll tax deferral period, the employer will become solely liable for the payment of the applicable employment taxes before the applicable due dates.