7/6/2021
The Coronavirus, Aid, Relief and Economic Security Act (CARES) Act allows employers to defer the deposit and payment of the employer's share of Social Security taxes. Self-employed individuals are also eligible to defer 50 percent of the social security tax imposed on their net earnings from self-employment, and household employers filing a Schedule H can defer the employer's portion (50%) of the Social Security tax on wages they paid their household employee during the deferral period.
The income must have been earned between March 27th and December 31, 2020, as well as deposits and payments due after January 1, 2021 that are required for wages paid on or after March 27, 2020, and before January 1, 2021.
The employment taxes on wages paid to household employees are paid annually, are not subject to deposit requirements, and are treated as self-employment taxes for purposes of the estimated tax payment penalty provision. The household employer's share of Social Security tax imposed for the payroll tax deferral period is not treated as a tax to which the estimated tax provisions apply, and payments of the deferred tax are due on the applicable dates. Half of the deferred Social Security tax is due by December 31, 2021, and the remainder is due by December 31, 2022.
Household employers should consider deferrals in determining their estimated tax payments and income tax withholding from any wages and other sources of income. Publication 505, Tax Withholding and Estimated Tax for use in 2020 gives more details on determining these amounts.
How You Can Repay the Deferred Taxes
The deferred taxes can be paid any time on or before the due date.
Individuals making deferred Social Security tax payments on the Electronic Federal Tax Payment System (EFTPS) should select 1040 US Individual Income Tax Returns and deferred Social Security tax for the type of payment. More information can be found on EFTPS.gov.
You must apply the payment to the 2020 tax year where you deferred the payment. They should be separate payments from other tax payments to make sure they are applied to the deferred tax balance on the tax year 2020 Form 1040, because IRS systems won't recognize the payment for deferred tax if it is with other tax payments or paid with the current Form 1040.
You should designate the payment as "deferred Social Security tax."
What If You Can't Pay In Full by The Installment Due Date?
If you are unable to pay the full deferred tax amount, you should pay whatever you are able to pay by the installment due dates to limit penalty and interest charges. If the installment amount is not paid in full, the IRS will send you a balance due notice, and you can follow the instructions on the notice to make a payment or apply for a payment plan.
You can visit the Paying Your Taxes page on the IRS website for more information about ways to pay, what to do when you can't pay, and viewing your tax account.
Resources: