Businesses with PPP Loans Now Eligible for Payroll Tax Deferral
President Trump has signed into law the Paycheck Protection Program Flexibility Act, which makes a number of positive changes to the Payroll Protection Program (PPP). Among these changes, business owners who take out a PPP loan and have that loan forgiven are now eligible to delay their payroll tax payments.
Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, businesses are eligible to delay certain employer-paid payroll tax benefits. However, the CARES Act blocked businesses who have their PPP loan forgiven from availing themselves of this delay. With this prohibition now lifted, all businesses — regardless of PPP status — may take advantage of the payroll tax delay.
For payroll taxes due from March 27 through the end of 2020, employers and self-employed individuals may defer payment of the employer share of Social Security taxes they are responsible for paying. This allows employers and those who are self-employed to save temporarily on the employer’s 6.2% Social Security tax on wages. Employees must continue to submit their portion of the Social Security tax.
Businesses should view this as an interest-free loan, as these delayed taxes must be repaid. Half of the deferred amount is due by Dec. 31, 2021. The balance is due by Dec. 31, 2022.