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Interaction of Payroll Tax Deferral and PPP Loans

4.22.20 | Client Alert – COVID-19

Recently, the IRS issued guidance on the deferral of employment tax deposits and payments through December 31, 2020.   Per the IRS guidance, employers that applied for and received a Paycheck Protection Program (PPP) loan that is not yet forgiven can defer deposits and payments of the employer’s share of Social Security tax that otherwise would be required to be made beginning on March 27, 2020 and ending on the date the lender issues a decision to forgive the loan, without incurring failure to deposit and failure to pay penalties.

Once the lender issues the decision that the PPP loan is forgiven, the employer can no longer defer deposits and payments of the employer’s share of social security tax due after that date. However, the amount of Social Security tax that was deferred until the date the PPP loan is forgiven can still be deferred such that 50% of the deferred amount is due on December 31, 2021 and the remaining amount is due on December 31, 2022.

For more information on the options available for small business taxpayers available under the CARES Act, please see our Decision Chart on the rules, limitations and interactions and our recent Client Alert COVID-19 Payroll Credits and the Benefits of Filing Form 7200 for Advanced Refunds.

For more information on any other matter related to the COVID-19 pandemic, please contact your Berdon Advisor.

Berdon LLP New York Accountants