The $2 trillion economic stimulus package that cleared Congress on Friday will let struggling companies defer paying the IRS a portion of payroll taxes.
Workers’ share, however, would still be collected and passed on to Uncle Sam.
Companies still will be withholding taxes from paychecks and remitting that to the IRS, but the employers half of payroll social security taxes can be delayed.
Payroll taxes, as they’re called, are withheld from your wages and are used to fund government programs — largely Social Security and Medicare. Those taxes are on top of your federal and state income tax withholdings.
Basically, the employee and the employer split payroll taxes. For Social Security, 6.2% of your wages — up to $137,700 for 2020 — are withheld from each paycheck and sent to the IRS, and the employer also remits a matched amount. In other words, the IRS receives the equivalent of 12.4% of wages to support Social Security.
For Medicare, the employee and the employer each chip in 1.45%, with no cap on wages subject to that portion of payroll taxes. In fact, an extra 0.9% Medicare tax is withheld for incomes above $200,000.
Self-employed workers pay both the employer and employee share — but are generally able to deduct half of it on their tax return.
Companies must regularly remit payroll taxes — both their contribution and what they withhold from workers’ paychecks — to the IRS, typically on a monthly or semi-weekly basis.
Qualifying employers will be able delay only their share of Social Security payroll taxes to the IRS. They would be delayed until Jan. 1, 2021, with 50% owed by the end of 2021 and the other half due Dec. 31, 2022. Companies’ share of the Medicare payroll tax will still be due as usual and are not deferred.
Please share this with your friends and relatives. If you have question please contact the Tax Professionals of Tax Management at 262 923-8100, extensions 1 Mike Sargent, 3 Kim Wenzel, 4 Bev Cobb and 701 Jennifer Hipkiss.