What you need to know about when you need to repay deferred taxes from 2020 and what your options are for how to do so.
Recap of the allowed deferral of employer taxes under the CARES Act of 2020.
The Coronavirus, Aid, Relief and Economic Security Act (CARES Act) allowed employers to defer the deposit and payment of the employer's share of Social Security taxes in 2020.
Section 2302 of the CARES Act provided that employers could defer the deposit and payment of the employer's portion of Social Security taxes for deposits due during the "payroll tax deferral period", which began on March 27, 2020, and ended on December 31, 2020.
The deferred deposits of the employer's share of Social Security tax must be deposited by the following dates (referred to as the "applicable dates") to be treated as timely (and avoid a failure to deposit penalty):
- On December 31, 2021, 50 percent of the eligible deferred amount; and
- On December 31, 2022, the remaining amount.
However, if an employer pays any amount before the applicable dates, any such payment is first applied to reduce the employer's liability for an amount due on December 31, 2021, and then to the amount due on December 31, 2022.
Options for how employers can pay the deferred amount of the employer's share of Social Security tax to the IRS.
The employer may pay the amount it owes electronically using EFTPS, by credit or debit card, or by a check or money order. The preferred method of payment is EFTPS. A separate payment must be submitted for each tax period in which your company deferred Employer Social Security taxes in 2020. If your company deferred these taxes in all 3 eligible quarters of 2020, then 3 payments need to be made, 1 for each quarter, by the 1st due date of December 31, 2021.
How can Fuse help our company with the payment of these deferred taxes to the IRS?
- Option 1: Fuse collects tax from your company and pays it to the IRS based on your instructions:
- Amount of tax you want to be paid to the IRS by December 31st, 2021
- Broken down by Quarter for which the tax was deferred in 2020
- Notify Fuse no later than December 15th, 2021
- If there is any remaining deferred tax liability, Fuse will reach out to your company again in the 4th Quarter of 2022.
- Option 2: Your company pays the deferred tax amount(s) directly to the IRS:
- The IRS mailed letters to each company in mid-2021 with reminders of the tax amounts that were deferred from each applicable tax period in 2020.
- If you choose this option, Fuse suggests that you submit your payment(s) through the Electronic Federal Tax Payment System (EFTPS): https://www.eftps.gov/eftps/
- Fuse will update our system to indicate that your company is paying your deferred taxes directly to the IRS
What does Fuse need from your company?
We ask that you complete the following form to instruct Fuse on how your company wants to process the payments of the deferred taxes to the IRS. If we do not receive a response from your company by December 15, 2021, Fuse will assume that your company is handling the payments directly with the IRS and you DO NOT want Fuse to process these payments on behalf of your company.
How can we determine or confirm the amount of deferred taxes due to the IRS from each tax period in 2020?
There are multiple ways to review the amount of Employer Social Security Tax that your company deferred for each eligible tax period in 2020. The following list is in order of accuracy since the IRS system is what ultimately determines the amounts your company owes in deferred taxes.
- IRS Notice(s) of Remaining Balance(s) for each tax period:
- In June 2021 the IRS mailed notices for each tax period in which your company deferred Employer Social Security taxes in 2020, showing the remaining amount of deferred tax due to the IRS at that time.
- These notices were all sent by the IRS using their Letter Number: LTR 3064C.
- Form 941 Copy for each tax period:
- These are provided by Fuse as part of the Quarterly Company Package that we produce for each tax period.
- Download from Fuse by navigating to My Info > My Reports > Payroll Reports > Taxes > Tax Documents
- The amount of deferred taxes that was reported to the IRS for each tax period can be found on Form 941, page 2, Part 1, line 13b
- Report of Deferred Taxes saved in Fuse for each tax period:
- Fuse has saved reports in your company to show the amount of Employer Social Security taxes that were deferred for each tax period in 2020.
- The amounts on this report could differ from what was filed to the IRS on form 941 for the same tax period if your company request Fuse to make any special adjustments to your tax deferrals
- View/Download from Fuse by navigating to My Info > My Reports > My Saved Report and locating the reports with the following Saved As Names
- IRS Employer Social Security Tax Deferral - Q2 2020
- IRS Employer Social Security Tax Deferral - Q3 2020
- IRS Employer Social Security Tax Deferral - Q4 2020