For the period beginning on the date of enactment through December 31, 2020, the timing for deposits of the applicable employer-portion of Old-Age, Survivors and Disability Insurance (OASDI), currently 6.2 percent, is deferred. Employers will be considered to have timely made their deposits of these OASDI taxes if at least 50 percent of the total during this period (date of enactment through December 31, 2020) is deposited by December 31, 2021 and the remaining 50 percent is deposited by December 31, 2022.
Similar rules apply to self-employed individuals in that the payment for 50 percent of the OASDI taxes (generally required to be paid in through estimated tax installments) for the period beginning on the date of enactment through December 31, 2020, are deferred to the dates noted above.
Note that the payment deferral for employers or self-employed individuals does not include the 1.45 percent hospital insurance (Medicare) tax.
The deferral in remittance of OASDI taxes is not available for taxpayers that have indebtedness forgiven under certain Sections of the Act with respect to a loan under section 7(a) of the Small Business Act.
In lieu of the actual employer contributions of OASDI tax during these periods, amounts will be appropriated out of money in the Treasury that is not otherwise appropriated, and will be transferred to the OASDI Trust Fund and the Federal Disability Insurance Trust Fund at such times to approximate the amounts that would have otherwise been transferred were it not for this Act.
The Act further states that for employers utilizing a third-party agent (payroll service) or professional employer organization, the employer shall be solely liable for the payment of such employment taxes before the applicable payment dates.
While this provision does not provide any relief in the form of tax credits, it may help employers with their cash flow management in the near-term.
Contact your Schneider Downs tax advisor if you have any questions or would like to discuss the provisions of the CARES Act.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.