In 2020, the CARES Act allowed employers to elect to defer the deposit of Social Security taxes that otherwise would have been paid between March 27, 2020 and December 31, 2020.
The first deadline for making these deferred deposits is January 3, 2022 (originally December 31, 2021 but changed due to the Federal Holiday). Employers must make a deposit of 50% of the deferred payments. Failure to meet the deadline will render the deferral invalid and a failure-to-deposit penalty will be issued. This failure-to-deposit penalty will result in a 10% penalty on the total deferral that was elected by the employer, not just the 50% deposit that was late.
If an IRS notice related to the deferral is received and not complied with, then the failure-to-deposit penalty will increase from 10% to 15%. Additional interest and other potential penalties can be applied as deemed fit.
Please keep in mind that the deadline for the remaining deferral is January 3, 2023.
How to repay the deferred taxes
Employers and individuals can make the deferral payments through the Electronic Federal Tax Payment System or by credit or debit card, money order or with a check. To be sure these payments are credited properly, they must be made separately from other tax payments.
EFTPS has an option to make a deferral payment. On the Tax Type Selection screen, choose Deferred Social Security Tax and then change the date to the applicable tax period (typically, the calendar quarter in 2020 for which tax was deferred). Visit EFTPS.gov, or call 800-555-4477 or 800-733-4829 for details.
Individual taxpayers can also use Direct Pay, available only on IRS.gov. Select the “balance due” reason for payment. If paying with a debit or credit card, select “installment agreement.” Apply the payment to the 2020 tax year where the payment was deferred.