The Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to offer some economic relief to employers affected by the coronavirus pandemic. In order to provide liquidity and retain employees during this period, the CARES Act section 2302 allows employers to delay the payment of the employer’s share of Old-Age, Survivors, and Disability Insurance Tax (Social Security), which is 6.2% of wages up to the annual wage base (137,700 in 2020), to a future date. The deferral also applies to 50% of the equivalent taxes incurred by self-employed persons.
Section 2302 of the CARES Act only applies to taxes incurred from March 27th through Dec. 31, 2020. Employers who opt to delay payment would need to deposit half of that delayed amount by Dec. 31, 2021, and the other half by Dec. 31, 2022.
The CARES Act section 2302 specifies that if an employer uses an agent to deposit employment taxes on its behalf and directs the agent to delay payments of the employer portion of Social Security tax as allowed by the Act, the employer and not the agent, is responsible for ensuring that the amounts of delayed tax are paid by the due dates. Therefore, any employer using a third-party payroll provider or agent should work with its payroll provider to implement this program. Note, each employer is responsible for determining its eligibility for this deferral and not the agent.
The CARES Act section 2302 also specifies that if an employer is a customer of a certified professional employer organization (CPEO) or professional employer organization (PEO) and the employer directs the CPEO or PEO to defer payments of the employer portion of Social Security tax as allowed by the Act, the employer, and not the CPEO or PEO, is responsible for ensuring that the amounts of delayed tax due are paid by the delayed due dates.
Section 2302 of the CARES Act does not apply to the employee’s share of Social Security tax, the employee or employer’s share of Medicare tax, or to the Additional Medicare tax imposed on employees with Medicare wages in excess of 200K. In addition, filing deadlines for reporting the employee and employer portions of Social Security and Medicare taxes have not been delayed by the Act.
Please note, an employer is ineligible to defer paying its portion of Social Security tax if it acquires a loan through the Paycheck Protection Program, established by section 1102 of the CARES Act, for which all or part of the loan was or will