Many taxpayers have applied for or are in the process of applying for Payroll Protection Loans. These same taxpayers hope that they will qualify for all or partial loan forgiveness as allowed under the program.
IRS Provides Clarification of The CARES Act Section 2302
The CARES Act (“the Act”) Section 2302 allows employers to defer the payments of the employer’s share of Federal Insurance Contributions Act (FICA) taxes due for the period March 27, 2020, through December 31, 2020.
Fifty percent of the deferred taxes are due on December 31, 2021, and the remaining fifty percent will be due on December 31, 2022.
However, the Act section 2302 provides that the FICA tax deferral does not apply to any taxpayer that has loan forgiveness under the Paycheck Protection Loan program. Since the decision about loan forgiveness will happen sometime in the future and is not certain, taxpayers have been wondering whether they still can take advantage of the FICA tax deferral pending any decision on loan forgiveness.
On April 10, 2020, the IRS issued FAQs explaining some of the provisions of section 2302 of the Act. Question 4 states that a business that has applied for and received a Paycheck Protection Loan can defer employer FICA tax deposits starting on March 27, 2020, through the date that the taxpayer receives a decision from the lender that the loan or a portion of the loan is forgiven. Once the taxpayer receives that decision from the lender, the taxpayer may no longer defer payment of the FICA taxes.
However, Questions 7 and 8 explain FICA tax payments deferred by the taxpayer up until the notification of the loan forgiveness continue to be deferred and are due on the extended payment dates of December 31, 2021 and 2022.
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