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CARES Act Section 2302 – Deferment of Employer’s Portion of Social Security Taxes – Don’t Forget!

Updated: Jan 11, 2021

By Molly Frazee; Financial Strategist

Back in the spring, one of the relief measures provided by the CARES Act was the deferral of payment of the employer’s share of social security taxes. This was in an effort for businesses to hold on to cash during these uncertain times. The Act designated the deferral period to be March 27, 2020 through December 31, 2020.

The key here is that these deferments are in fact to be repaid to the IRS, they are just letting employers kick that liability can down the road. Specifically, those taxes unpaid during that time are due as follows:

  • 50% of deferred amounts will be due December 31, 2021

  • Remaining 50% will be due December 31, 2022

This is all well and good, but we encourage you to track these deferred taxes as a liability in your financial statements. You do not want to get to December 31, 2021 and have to come up with cash for previous year taxes without it being on your radar, and the same is true for the following year. While money in your pocket is crucial at times like these, you may want to consider ending the deferments and pre-paying what you currently owe. This is in an effort to prevent any future shock factor with cash outlays related to previous years.

At a minimum, we strongly recommend you build them into your cashflow planning to ensure you have the funds to make those payments when the time does come to pay it back.

Should you decide to pay these back early, you must work closely with your payroll processor. Many providers will report the quarterly payroll filings (941) with the deferred amount listed. They may also be able to remit those payments early should you decide to go that route. If your payroll processor informs you that it is up to you to make the deferral payments, the IRS recommends that you pay through their EFTPS (electronic payment system) in order to ensure the payments are applied to the correct quarter.

If never having paid through that system before, you will have to register for an account. Again, we stress working closely with your payroll processor in order to prevent any errors in reporting and payments made.

If you need help in cashflow planning, contact us


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