You have your PPP Loan, which is helping with cash flow. Are there any other government provisions to help you maintain your business and employees during these uncertain economic times?
The answer is Yes. An employer can defer payment of the employer share of Social Security tax, even if the employer has received a PPP loan. This is how it works.
Per the IRS, employers who have received a PPP loan may defer payment of the employer’s share of Social Security tax that otherwise would be required to be made beginning on March 27,2020 through the date the lender issues a decision to forgive the loan. Once an employer receives a decision from its lender that its PPP loan is forgiven, the employer is no longer eligible to defer payment of the Social Security tax due after that date. The Social Security taxes deferred under the provision must be paid 50% by December 31, 2021 and the remaining 50% by December 31, 2022. There are no penalties or interest charges on the taxes deferred.
This is an option if you are experiencing current cash flow issues and/or are concerned about your business when the PPP funds are spent. Remember, this is JUST the EMPLOYER’s share of the Social Security tax due when you issue a payroll. It DOES NOT include any taxes withheld from the employee’s paycheck, nor does it include the employer’s share of Medicare tax.
Presumably the IRS will revise the quarterly 941 form so you can report the amount of SS taxes you are deferring, should you choose this option.
This is basically an interest free loan from the government. But it is a debt, and repayment must be made. The unpaid Payroll Liabilities will continue to show up on your Balance Sheet until payment is made. You can also pay early, the IRS will always accept your money.
Please contact us if you would like to learn more about this option.