The Coronavirus Air, Relief, and Economic Security (CARES) Act allows ALL employers to defer the deposit and payment of the employer’s share of Social Security taxes. This frees up cash on hand.
Who Can Defer Deposits and Payments
Beginning March 27, 2020 through December 31, 2020, employers may defer the deposit and payment of the employer’s portion of Social Security taxes.
Who Cannot Defer These Payments
Employers that received a loan under the Small Business Administration Act (the Paycheck Protection Program) may not defer the deposit and payment of the employer’s share of Social Security tax that is otherwise due after the employer receives a decision from the lender that the loan was forgiven. The employer can defer these deposits until the loan is forgiven. Once the loan is forgiven, the employer can continue to defer previous payments that will be due on the applicable dates.
When are the Deferred Deposits Considered Timely Made?
The deferred deposits of the employer’s share of Social Security tax must be deposited by the following dates (referred to as the “applicable dates”) to be treated as timely (and avoid a failure to deposit penalty):
- On December 31, 2021, 50 percent of the deferred amount; and
- On December 31, 2022, the remaining amount.
Personal Liability for Executives and Board Members
Social Security taxes are trust fund taxes and liability for the failure to remit them usually extends to those deemed “responsible persons” under Subtitle C, which could include executives and board members. However, since the portion being allowed for deferral under the CARES Act represents the employer’s portion, it may not be covered by the penalties under Section 6672 of the code. Therefore, if the organization finds itself in a position unable to fully remit those taxes at the time the deferral becomes due, personal liability may not extend to these individuals.
We understand the affect these changes have on your organization and are here to assist. Please contact us if you have questions or need more information about the topics discussed above.