Overview
For additional guidance, please refer to Steptoe's COVID-19 Resource Center.
On April 10, the IRS released frequently asked questions (FAQs) regarding the interaction of relief provisions for employers in the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). These FAQs clarify the provision of the CARES Act that prohibits payroll tax deferral for employers that receive forgiveness on a Paycheck Protection Program (PPP) loan. According to the FAQs, employers can defer payroll taxes until the point in time that a lender forgives a PPP loan. This guidance allows employers who intend to apply for such forgiveness to take advantage of the payroll tax deferral until they receive notice that a PPP loan is forgiven. Payroll taxes that are due on or after the date a PPP loan is forgiven are ineligible for deferral. However, payroll taxes that were deferred prior to forgiveness of a PPP loan may continue to be deferred by the organization until the deferred due dates of December 31, 2021 for 50% of the deferred amount and December 31, 2022 for the remaining amount deferred.
In addition, the FAQs clarify that an employer is able to defer payroll taxes prior to determining the amount of refunds or payroll tax deposits that it may retain in anticipation of the CARES Act employee retention credit.
PPP loans are available to section 501(c)(3) and 501(c)(19) organizations that meet other eligibility requirements. All employers are eligible for payroll tax deferral. See our prior coverage here.
