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Tax Deferral and the PPP Loan

tax deferrals

As we, the team at Milikowsky Tax Law, have reviewed the newly released CARES Act and Paycheck Protection Program, several places in need of further clarification in order to make them as effective as possible for small businesses have arisen. On April 10, the IRS answered a few frequently asked questions in regard to the CARES Act Tax Deferrals and the PPP.

Among these questions, the IRS clarified that employers who have taken out a PPP loan are eligible to defer payments of the employer’s portion of Social Security tax through the date that the lender issued for the forgiveness of the loan. 

Employers who have received a loan under the SBA PPP Act may not defer the deposit and payment of the employer’s share of social security tax on or after the date the PPP loan is forgiven (Section 1102 CARES Act).

Any employer that has received a PPP loan that has not yet been forgiven, are able to defer deposit and payment of the employer’s share of social security tax through the date the lender decides to forgive the loan without incurring any failure to pay penalties (Section 1106 CARES Act)

After the employer receives that decision from their lender that their PPP loan is forgiven, they are no longer able to defer deposit and payment of the employer’s share of social security tax due after that date. On December 31st, 2021, 50% of the deferred amount is due. The remaining amount is then due on December 31st, 2022.

Understanding the tax intricacies of the CARES Act and the PPP loan can be complicated. The team at Milikowsky Tax Law is here to make it simple for you. Contact us for more information on how to reduce your risk of tax misconduct during these challenging times.