If you’re an employer or a self-employed individual who opted to defer part of your Social Security taxes for 2020, the IRS would like to remind you that the deadline for your second installment is due soon.
Back in 2020, the Coronavirus, Aid, Relief and Economic Security (CARES) Act was passed to help individuals and businesses that were struggling during the pandemic. Among other things, the Act allowed self-employed individuals to defer paying certain self-employment taxes from March 27, 2020, through December 31, 2020. It also allowed employers to defer the deposit and payment of the employer’s share of Social Security tax liability, which is 6.2% of wages, during the same period.
Individuals and organizations that took the deferral were expected to pay the first 50% by the end of 2021 and the next 50% by December 31, 2023. (Because December 31 falls on a Saturday this year, and January 2 is a holiday, however, payments submitted by January 3, 2023, will be considered on time.)
Payments that are not made by then will be subject to penalties and interest.
Earlier this fall, the IRS sent reminder notices to individuals and organizations that elected to take the deferral. It has made a point of noting that taxpayers are still responsible for making the full payment on time, even if they didn’t receive the reminder.
To avoid follow-up bills and notices and to ensure that it is credited properly, deferral payments should be made separately from other tax payments.
Employers and individuals can use any of the following options for making this payment:
Electronic Federal Tax Payment System (EFTPS)
The Electronic Federal Tax Payment System is a free service available from the Treasury Department. After enrolling, select “Deferred Social Security Tax” from the Tax Type Selection screen and change the date to the applicable tax period (the calendar quarter in 2020 for which tax was deferred).
Self-employed individual taxpayers can use Direct Pay to pay directly from a checking or savings account at no extra charge. Select the “Balance Due” reason for payment and apply the payment to the 2020 tax year where the payment was deferred. Direct Pay is not available to pay employment taxes.
Debit Card, Credit Card, or Digital Wallet
You can make your payment online or over the phone with a credit card, debit card, or digital wallet via authorized third-party payment processors.
Note that these processors charge a fee.
Check or Money Order
Checks or money orders should be made out to the United States Treasury (not the IRS). For information on where to send checks or money orders, see Instructions for Form 941 (06/2022).
If you are unsure if you owe deferred taxes or have concerns about them or any other tax issues, contact Tonneson + Co today. We’re here to help!