What are the Rules for CARES Act Payroll Tax Deferment?

As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), businesses may defer payment of employer payroll taxes imposed between the enactment of this law (March 27, 2020) and December 31, 2020. Half of the deferred taxes are due by December 31, 2021 and the rest are due by December 31, 2022.

Here are the rules for employers that wish to take advantage of the CARES Act payroll tax deferment:

• For-profit businesses, government employers, and exempt organizations are all eligible to use this deferment.
• You can choose to defer some or all of the eligible tax amount, and deposits can be made any time before the December deadlines.
• Deferment is only available for your portion of Social Security taxes, which is calculated at 6.2% of the first $137,700 of employee wages.
• There is no cap on the amount of payroll taxes that may be deferred under this provision.
• Employee income tax withholding, the employee or employer portion of the Medicare tax (1.45% of all wages), or the employee portion of the Social Security tax are not available for deferment.
• If you anticipate receiving Families First Coronavirus Relief Act (FFCRA) employee retention tax credits or paid leave credits, you can also use this deferment.
• If you have applied for or received a Paycheck Protection Program loan, you can defer your deposits until the loan has been forgiven. Those deposit amounts can continue to be deferred until the December due dates.
• If you are self-employed, you can defer 50% of the self-employment tax based on 12.4% of your self-employment income.
• Significant penalties may be imposed if you fail to make deposits by the December deadlines.

Get more details, including FAQs about this payroll tax deferment, on the IRS website.

Find more information on all COVID-19 payroll and HR issues in our Resource Center.