Payroll Tax Deferral & Benefit Changes
Form 5500 & 8955-SA Relief.In response to the COVID-19 emergency, the IRS has automatically extended the deadline for retirement and welfare plans to file Form 5500 and Form 8955-SSA until July 15, 2020. As explained below, however, this automatic extension will only be useful to certain benefit plans with a non-calendar plan year. Both Form 5500 and Form 8955-SSA must be filed by the last day of the 7th month following the end of a plan year. A plan may extend this original filing deadline by applying for a 2 1/2 month extension using Form 5558. The IRS has, however, granted an automatic extension until July 15, 2020 for plans with original or extended filing deadlines that fall on or after April 1, 2020 through July 14, 2020.’ Calendar year plans will not benefit from the automatic extension because their original filing deadline falls on July 31, 2020 – which is outside of the relief window. Without additional IRS-issued relief, in order for a calendar year plan to extend its filing deadline, the plan must still apply for the 2 1/2 month extension using Form 5558. Non-calendar year plans may also want to apply for the standard 2 1/2 month extension if doing so will extend their original filing deadline beyond July 15, 2020. For example, a plan with a plan year ending October 31, 2019 has an original filing deadline falling on May 31, 2020, which can be extended until August 15, 2020 by filing Form 5558.
Employer Social Security taxes Deferral (CARES Act: Section 2302)All employers may choose to elect to defer payment of the 6.2% employer Social Security tax starting April through December 31, 2020. Employers deferred tax amounts will be paid in equal amounts over two years. Payments are due on December 31, 2021 and December 31, 2022. There are other tax credit and loan programs that may offer greater benefits to employers than a tax payment deferral, including the following:
- New Paid Sick/Family Leave Credit (FFRCA Sections 7001 & 7003), or
- New Employee Retention Credit (CARES Act Section 2301)
- New Payroll Protection Program loans (CARES Act Section 1102)
- Small Business Research Credit (§ 41(h) of the Internal Revenue Code (IRC),
- Qualified Veterans Credit (§ 51 of the IRC), and
- Employer Credit for Paid Family and Medical Leave (§ 45S of the IRC)
RestrictionsDeferral is not available to employers receiving assistance through the Paycheck Protection Program (“PPP”) (Section 1102 of the CARES Act, summarized below). Further, although some of the options explained below may be available in addition to deferring employer Social Security tax, the tax credits covered below generally apply to employer Social Security taxes, potentially reducing or even eliminating such taxes for the balance of 2020. As a deferral, these taxes will become collectible by the IRS starting in December 2021. Employers should keep careful track of amounts accrued and be prepared to pay the amounts when due.
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