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. While we’re still waiting on more information from the government about the precise mechanics of how these repayments will be processed, the IRS released COVID Tax Tip 2021-99 setting the expectation that clients of PEOs like Justworks will work with their provider on repayment of their deferred taxes to facilitate a smoother reconciliation of your obligation. As soon as they release 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. Additionally, if you do not timely pay the 50% portion that is due by December 31, 2021, the IRS will likely consider the entire 2020 deferred amount to be due immediately, with penalties and interest.
- We want to pay the full amount this year. Can Justworks debit us for the total, not just 50%? At this time, we are only going to debit you for the 50% that is due at the end of this year. This is to ensure that we are able to remit and fully reconcile the amount you repay with Justworks with the 2021 tax return records to help your company avoid costly errors and penalties. We are looking into how we can potentially facilitate early repayment of the next 50% in early 2022.
- If my company deferred any amount of employer social security taxes outside of Justworks (ie, either before or after being a customer of Justworks), will Justworks facilitate repayment of those amounts as well? Justworks cannot facilitate repayment for any SS taxes that may have been deferred outside of Justworks, since they are not part of our quarterly tax returns. You should work with your previous/subsequent provider and/or the IRS to arrange for repayment of those amounts
- What if we’ve already paid some or all of our deferred employer social security taxes directly to the IRS? How do I ensure Justworks does not debit my company for that amount? We have emailed all current and former customers who deferred employer social security taxes through Justworks. These emails contain links to a form you can complete to provide us with more information about amounts you’ve already paid directly to the IRS.
- 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.