Do Employers Who Receive a Paycheck Protection Program Loan Qualify for Social Security Tax Deferral?

It was previously thought that an employer who received a Paycheck Protection Program Loan (PPPL) could not utilize payroll tax credits or Social Security (SS) tax deferrals that were created by the CARES Act. Guidance recently clarified this issue. Specifically, employers who receive a PPPL can utilize the SS tax deferral beginning March 27, 2020 for the employer portion of SS taxes. The clarification states that if you have received a PPPL, you may continue to defer the SS tax while making payroll with PPPL funding, or out of business funds after the eight weeks expire, up to the point when the lender issues a decision to forgive the loan. Once the PPPL is forgiven, however, the employer is no longer eligible to defer SS tax deposits through the remainder of 2020.

Any tax deposits deferred up to the point of the PPPL forgiveness continue to be eligible for deferral and must be paid 50% on December 31, 2021 and the remaining 50% on December 31, 2022. The IRS has an extensive list of FAQs here that provide additional clarification on this topic. See in particular FAQ numbers 4 and 7.

Feel free to reach out at any time with any questions you have.