Setting up employer-paid Social Security tax deferrals in Justworks
The CARES Act offers eligible small businesses the opportunity to defer employer-paid Social Security taxes from March 27, 2020 until December 31, 2020.
How does it work?
If you choose to opt into the Social Security tax deferral, your business will then be required to pay back the deferred taxes in two installments, 50% at the end of 2021 and the remaining 50% at the end of 2022. We’re still waiting on more information from the government about the precise mechanics of how these repayments will be processed. 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 to expect after you opt into the tax deferral
Justworks will stop collecting the employer portion of your Social Security taxes. Starting with the invoice of your next payroll, you will see a charge and a credit for the employer portion of your Social Security taxes.
The IRS has now ruled that employers can both defer payment of their employer-paid social security tax, through December 31, 2020, and ultimately seek forgiveness of a Paycheck Protection Program (PPP) loan issued by their lender.
This guidance is a departure from prior commonly-held assumptions based on the statutory text of the CARES Act.
Once an employer receives a decision from its lender that its PPP loan is forgiven, the employer is no longer eligible to continue deferring payment of the employer's share of social security tax due after that date, even if it is before December 31, 2020.
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.