IRS gives new payroll tax breaks under CARE Act
There are a number of important new tax breaks provided under Coronavirus Aid, Relief, and Economic Security (CARES Act). One of them is for employers to delay payroll tax payment and another one is to get a refund of wages paid to employees.
For delay of the social security taxes, employers can defer payment of the 6.2% share of social security tax on wages paid from Mar. 27 through Dec. 31, 2020. Half of the delayed payroll tax will be due on Dec. 31, 2021 and the other half will be due on Dec. 31, 2022. For self-employed people, they can defer 50% of the self-employment tax.
For qualifying for the payroll tax credits, the credit is up to 50% of wages, up to $5000 per paid employee to offset the employer’s 6.2% share of social security taxes, with the excess refundable.
Qualified wages are the wages paid from March 13 through Dec. 31, 2020. Employers can get the credits by reducing their payroll tax deposits otherwise owed to the IRS and claim the excess credit by filing form 7200.
There are lots of rules and complexities involved with this payroll tax credit. One important restriction is that employers who get an SBA paycheck protection loan under the CARES Act are not eligible for the credit.
If you are interested in knowing more about know if you qualify and how to claim the credits, please contact DHH for further information.
January 17, 2021