If you opted to defer paying part of your 2020 Social Security tax requirement due to the impacts of COVID-19, a payment due date is approaching quickly on January 3, 2022. The Internal Revenue Service recently sent out payment deadline reminders to affected employers and self-employed individuals and the expectation is that payments should be made on time for those who deferred, even if they did not receive a reminder notification.
These payment deferrals were provided as part of the COVID-19 relief efforts of 2020. Employers and self-employed individuals had the option to elect putting off paying the employer’s share of their eligible Social Security tax obligations, normally 6.2% of wages and split the payments over the next couple of years. (IRS Notice 2020-65) Half of that deferral is now due on Jan. 3, 2022, and the other half on Jan. 3, 2023. Be wary, if payments are not made to the IRS on time, penalties and interest will apply to any unpaid balance.
If you and your business are impacted by this policy and need to make a deferral payment, here are repayment options that the IRS has outlined on their site:
- Payments can be made through the Electronic Federal Tax Payment System (EFTPS) or by credit or debit card, money order or with a check. To ensure 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.
For more details regarding these deferral payments and IRS Notice 2020-65, check out this page on COVID-19 tax tips from the IRS website here. If you have questions about how the above changes may impact your tax planning strategy, BerganKDV can help. Contact us and one of our professionals will be happy to assist you with your tax planning needs