COVID-19 Employer Social Security Payment Deferrals

This article will discuss the COVID-19-related CARES Act (passed 3/27/2020) and what it means for your payment/deferral of federal Social Security taxes.

CARES ACT OVERVIEW

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, in an effort to provide immediate financial relief to businesses and individuals. The passage of this legislation allows employers to defer all 2020 employer-paid Social Security taxes as of Friday, March 27, 2020, so that organizations have access to funds during the COVID-19 pandemic.

Please note: this is not a tax exemption, but, rather, a deferred payment schedule.  

This deferred payment schedule can be leveraged in conjunction with the Paycheck Protection Program (PPP) loan administered by the Small Business Association (SBA) during the twenty-four-week loan period.

Namely is designed to collect and remit payroll taxes automatically. If you choose to opt into a deferred payment schedule, 50% of your EIN’s 2020 employer-paid Social Security taxes will be due to Namely by December 20, 2021,* so that we can reconcile and remit payments to the SSA by January 3, 2022. The remaining 50% is due on January 3, 2023.

*Please note: While the IRS only requires you to pay 50 percent of your total balance deferred, Namely must apply payments on a per-pay-cycle liability basis. For example, if you deferred:

$100 in pay cycle 1
$200 in pay cycle 2
$150 in pay cycle 3
$125 in pay cycle 4

Your total deferred balance is $575, and the IRS must receive at least $287.50. However, because Namely must apply the payments in a manner that satisfies the total liability owed on individual pay cycles, you must wire at least $300. This amount satisfies the $287.50 expected by the IRS, while also paying off the full liabilities for pay cycle 1 and pay cycle 2.

If you’d like to opt in and have already processed a payroll (since 3/27/2020) with employer-paid Social Security taxes, please visit the following article for instructions and a link to the digital Tax Deferral Request form: COVID-19: Tax Deferral Waiver.

Please continue to monitor content in the Navigating COVID-19 section of the Help Community for up-to-date information on how to use Namely to manage your business as new legislation is passed.
 

STAY UP TO DATE:

Always stay up to date with COVID-19: Consolidated Appropriations Act Updates for 2021.

 

FREQUENTLY ASKED QUESTIONS

Does the employer Social Security tax deferral apply to all taxable earnings? Not just those associated with COVID-19?

Yes, this applies to all taxable earnings up to the Social Security taxable limit of $137,700.
 

Are we able to utilize this tax deferral in addition to the Sick and Family Leave earnings?

Yes - the tax deferral applies to all taxable earnings; however, Sick Leave and Family Leave are not subject to Social Security taxes.

Please refer to the Help Community Articles on Paid Family Medical Leave and Paid Sick Leave for more details.

 

Does the deferred payment schedule apply to all 2020 payrolls?

No- it applies to payrolls run March 27, 2020- the day the legislation was signed- or later.

 

Does the CARES Act exempt payment of employer Social Security taxes?

No, the CARES Act is a deferred payment schedule, not an exemption of any employer Social Security taxes. You will still owe money for Social Security- the funds are just due at a later date.

 

If we’ve already submitted a payroll with employer-paid Social Security taxes, can we get that money back?

If you have submitted a payroll with employer-paid Social Security taxes, and those taxes have not yet been remitted on your behalf, then we are able to return that money- if you choose to opt into the tax deferral, we’ll be refunding those funds as quickly as possible to your organization; however, any funds that have already been remitted cannot be refunded at this point.

 

How do I opt in to defer my employer Social Security taxes for the rest of the year?

Please visit the following article for instructions and a link to our digital Tax Deferral Request form in order to opt in to deferring any eligible taxes: COVID-19: Tax Deferral Waiver.

 

Will this deferral have any impact on my employees’ net wages?

No - since this is only a deferral of employer taxes, your employees should not see any differences in their net wages.

Can our organization defer our employer Social Security taxes and receive a loan from the Small Business Administration (SBA)?

Yes - this deferred payment schedule can be leveraged in conjunction with the loan during the twenty-four-week loan period. At the end of this period, tax deferrals can continue to be leveraged only if your loan is not forgiven. If your loan is forgiven, you must advise us at the end of this period so that we can continue collecting employer social security. Failure to do so could result in late filings, penalties, and interest.

 

If we are rejected or are deemed ineligible for the SBA loan, are we eligible for employer Social Security tax deferrals?

Yes - you would be eligible for the duration of the program.

Note: for information on current state tax deferral provisions, please see COVID-19: Deferred State Tax Payments.

If we choose to split the payments, how will Namely obtain those funds?

You will need to Wire Your Funds to Namely.