Companies and self-employed individuals that took advantage of the payroll tax deferral under the Coronavirus Aid, Relief, and Economic Security (CARES) Act should be aware of an IRS position regarding repayment of the deferred taxes.

One provision of the CARES Act (2020) allowed employers and self-employed individuals to defer payment of the employer’s share of FICA tax on wages paid between March 27, 2020, and December 31, 2020. The law states that 50% of these taxes would be due on December 31, 2021, and the balance on December 31, 2022. However. since the federal holiday for New Year’s Day falls on Friday, December 31, 2021, the first payment of the deferred tax is due on Monday, January 3, 2022.

Cash basis taxpayers should consider making their first payment by December 31, 2021, in order to receive the income tax deduction in 2021. Businesses using third-party payroll providers should coordinate with them to ensure the proper amounts and dates of the payments to be made. Businesses who make their own payroll tax deposits can make the payments via check, credit card, or electronically at

Failure to make the payments on time will result in severe penalties. A 10% failure to deposit penalty will be imposed on the entire amount of the deferral, not just the 50% due now. Many businesses who elected to defer their FICA taxes have received reminder notices and vouchers from IRS. However, a business that did not receive a reminder is still responsible for the timely payment of the tax.

The CARES Act provided improved cash flow to employers by allowing a deferral of 2020 payroll taxes among other relief programs.  However, the rules for these programs are complex and employers may need to work closely with their advisors and payroll providers to utilize them effectively.

If you would like to further discuss your year-end tax strategy please mention it to your KatzAbosch representative or contact us today.

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