The March 2020 CARES ACT provided many stimulus opportunities to employers. One of which was the option for employers to defer/postpone the payment of the employer portion of FICA taxes due on wages paid from March 27, 2020 through December 31, 2020. This deferred / postponed the repayment of these taxes until the end of 2021 and 2022.   Specifically, 50% of the FICA tax deferral is due December 31, 2021 with the remaining amount due December 31, 2022.

Every employer that chose to defer/postpone the employer share of FICA tax should have kept track of this tax obligation due to the IRS, in some manner, with many actually reporting this amount as liability on the Company’s balance sheet.   This deferral amount was also reported on the employer’s quarter payroll tax returns (Forms 941).  If the employer did not keep track of this amount then they can go back and calculate this amount by adding up all of the deferrals from the quarterly payroll tax returns.

The IRS has recently sent out “reminder letters” to taxpayers, which report how much each employer owes in deferred FICA taxes. The employer should match the amount reported on the IRS letter to what the employer reported as being deferred on their payroll tax returns.

HOW TO PAY YOUR DEFERRED FICA TAXES

The IRS has indicated that the employer can pay the deferred tax obligations by EFTPS (preferred method) or by credit card or check.   The IRS has also made it clear that the amounts paid must be remitted separately from other taxes such that the IRS can identify the payments as those pertaining to FICA taxes deferred from 2020.   Finally, the deferred FICA taxes must be paid “separately” for each quarter.  

If paying by EFTPS or by credit card, an employer that files Form 941, must select Form 941, the calendar quarter in 2020 to which the payment relates, and select payment due on an IRS notice.   If the payment relates to more than one quarter, the employer must make separate payment for each quarter.   If paying by check or money order, the employer must include a 2020 Form 941-V, Payment Voucher.  The employer should fill in the circle for the applicable quarter and should write its EIN, “Form 941”, and the applicable quarter on the check.

If you have any questions, please contact your tax professional at Dermody, Burke & Brown directly. 

The information reflected in this article was current at the time of publication.  This information will not be modified or updated for any subsequent tax law changes, if any.