IRS Updates FAQs on Deferral of Payroll Taxes for PPP Borrowers

  • IRS updates FAQs to reflect employment tax deferrals due to PPPFA
  • PPP borrowers are no longer restricted to defer payroll taxes after loans are forgiven

The Internal Revenue Service updated its list of frequently asked questions June 26 to reflect the changes in the Payroll Protection Program Flexibility Act (PPPFA) and give employers the option to defer employment tax payments through Dec. 31, 2020.

Under the law, employers with Payroll Protection Program loans can defer employment taxes even when the loan is forgiven, the IRS said in Question 4 of the FAQs.

The PPPFA strikes the rule that would have “prevented an employer from deferring the deposit and payment of the employer’s share of Social Security tax after the employer receives a decision that its PPP loan was forgiven by the lender. Therefore, an employer that receives a PPP loan is entitled to defer the payment and deposit of the employer’s share of Social Security tax, even if the loan is forgiven,” the guidance said.

Before the PPPFA, which was enacted June 5, an employer that received a PPP loan was not allowed to defer the deposit and payment of the employer’s share of Social Security tax after the receipt of the lender’s decision forgiving all or a part of the loan.

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