Delay of Payment of Employer Payroll Taxes

COVID-19 Update

Last Updated: April 16, 2020

Under Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), an employer may delay the payment of the employer share of Social Security taxes (6.2% rate) that otherwise would be due between March 27, 2020, and December 31, 2020. Self-employed individuals similarly may delay payment of half the Social Security portion of the self-employment tax. Payment of 50% of such taxes is then required to be made no later than December 31, 2021, and the balance by December 31, 2022.

For employers using a paying agent for payroll taxes or employing workers through a certified professional employer organization (PEO), the employer (and not the paying agent or PEO) is fully responsible for making the delayed payments.

Employers that receive paycheck protection loans under the CARES Act are not eligible for the payroll tax deferral after such loans are forgiven under CARES Act provisions. Employers receiving paycheck protection loans are eligible to defer these taxes prior to receiving the lender’s decision of forgiveness, and 50% of the taxes deferred prior to that time are due by December 31, 2021, and the balance by December 31, 2022.

An employer may defer payment of the employer’s share of Social Security tax prior to offsetting against such tax any paid leave credits under the Families First Coronavirus Response Act or employee retention credit under the CARES Act. With the taxes deferred, the employer may then be eligible for advance payment of, or refunds relating to, these credits.

How Manatt Can Help: Manatt is closely following the various employment and tax relief measures being implemented to ease financial burdens on businesses affected by the COVID-19 pandemic. We are here to help clients work with their payroll providers and PEOs to take advantage of the tax deferral options being made available while minimizing future financial risk.

For More Information: Contact David Herbst, partner, Manatt Tax, at dherbst@manatt.com or 650.812.1320, or Jeffrey A. Mannisto, partner and leader, Manatt Tax, at jmannisto@manatt.com or 310.312.4212.

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