The CARES Act offered eligible small businesses the opportunity to defer employer-paid Social Security taxes from March 27, 2020 until December 31, 2020.
How did it work?
If you chose to opt into the Social Security tax deferral program, Justworks stopped collecting the employer portion of your Social Security taxes. On your following invoices, you will have seen a charge and a credit for the employer portion of your Social Security taxes.
Your business is required to pay back the deferred taxes in two installments, 50% by December 31, 2021 and the remaining 50% by December 31, 2022. The IRS released COVID Tax Tip 2021-99 setting the expectation that clients of PEOs like Justworks work with their provider on repayment of their deferred taxes to facilitate a smoother reconciliation of your obligation. If the IRS releases more guidance, we’ll let you know. Ultimately, your company, and not Justworks, will be responsible for any amounts owed back to the IRS.
- What happens if I don’t have the money to make these repayments? Will Justworks kick me off the platform? Justworks will not sever the customer service agreement we have with your company in the event you cannot make repayment. However, based on information currently available to Justworks, our understanding is that the IRS will seek repayment from you directly and you will be liable for any penalties from the IRS as a result of late repayment.
- We’d prefer to repay directly to the IRS. Can we do that? Per COVID Tax Tip 2021-99, the IRS expects customers of PEOs who deferred employer social security through their PEO to repay those amounts through the PEO. Accordingly, we strongly encourage all current and former customers to repay through Justworks, rather than directly to the IRS, to avoid complications down the line.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.