The Coronavirus Aid, Relief and Economic Protection Act include many provisions on corporate relief, including an employer payroll tax deferral and a related provision providing for a credit to retain workers.
Understand CARES Act Payroll Tax Deferral?
The deferral refers to the deposits and payments of the Social Security tax portion of the employer. Otherwise, that world has to be made during the period beginning on March 27, 2020 and ending on December 31, 2020. This period is called the “payroll tax deferral period” under section 2302 of the CARES Act.
Self-employed or individuals are eligible to defer the payment of 50% of the Social Security tax on net earnings from self-employed income levied under section 1401. There is no penalty for failure to make estimated tax payments for 50% of Social Security tax on net income from self-employment during the payroll tax deferral period.
IRS issued guidance
There is some guidance issued by the IRS regarding the payroll tax referrals that offer businesses much-needed clarification about PPP. The issues that are addressed include the following:
- Paycheck Protection Program loan recipients may defer paying these taxes. Once the employer receives a decision from its lender that the loan is forgiven, however, the employer is no longer eligible to defer such taxes after that date.
- Self-employed individuals are eligible to defer paying self-employment tax. Self-employed individuals who pay Social Security taxes may defer payment of 50% of the Social Security tax on net earnings from self-employment income.
- All employers are allowed for the deferral program. However, employers who receive a PPP loan become ineligible to continue deferring tax payments after receiving notice that the loan is forgiven.
- Employers need not make a special election to defer deposits and payments. The IRS is going to revise once again Form 941 (Employer’s Quarterly Federal Tax Return) for the second calendar quarter of 2020 (April through June 2020).
Several special Deferral rules
There are some of the specific Deferral rules that keep in mind for CARES Act Payroll Tax Deferral Process in QuickBooks:
- The Deferral also applies to the associated estimated tax in respect of 50 percent of self-employment taxes for individuals.
- The deferral is not eligible for those taxpayers who have indebtedness forgiveness under the Payroll Protection Program (PPP) or indebtedness forgiveness under the Main Street Lending Program.
- If an employer appoints an agent to deposit employment taxes, the employer who directs the agent to defer the payment of employment taxes shall be liable if the taxes are not paid in due time by the date of deferment applicable.
- The Internal Revenue Service is allowed to provide regulations and guidelines in support of the rules on deferral.
- Although these laws allow the tax payment to be postponed, they do not alter the financial responsibility of those responsible for the trust fund part of the withheld taxes (employee income tax withholding and employee parts of the Social Security and Medicare taxes).
How can you defer your employer portion of Social Security under the CARES Act?
QuickBooks Online Payroll
- Initially, go to Settings then select Account Settings
- Next, click on Payroll Settings
- Now, select the link of Employer Social Security deferral under the Cares Act section
- After that, select the box that appears next to “I want to defer my employer portion of Social Security”
- At last, click on the OK button
Intuit Online Payroll
- The very first, select “Setup” tab
- Next, select and click on the link named “Employer Social Security deferral” under the CARES Act Section
- Now, select the box that is next to “I want to defer my employee portion of Social Security”
- Finally, hit the OK option.
Intuit Online Payroll Full Service
- Firstly, go to the tab named “Account Settings”
- Now, click on Edit which is next to “Employer Social Security deferral” under the CARES Act Section
- After that. Select the box which comes next to “I want to defer my employee portion of Social Security”
- Finally, hit the OK option.
The Deferral’s availability is an essential feature of the Act and employers can decide whether they will benefit from this tax provision. To know more about the CARES Act payroll tax deferral process in QuickBooks and it applies and benefits your business, you can contact QuickBooks support toll-free helpdesk number 1-800-865-4183 carrying years of experience. They provide you better assistance and an instant resolution in a single call. If in case, you fail to reach through the call you can also drop an email and do a live chat.