Deferment of Employer FICA and Medicare Tax Payments

Employers ordinarily have to pay certain employment taxes—known as Federal Insurance Contributions Act (FICA) taxes. FICA taxes help fund both Social Security and Medicare. The employer contributes 6.2 percent of payroll wages to fund Social Security and an additional 1.45 percent for Medicare. Employees contribute a matching amount through their payroll withholdings. These payments are generally deposited to the U.S. Treasury electronically either semi-weekly or monthly.

The CARES Act will allow employers and self-employed individuals to defer paying their portion of the social security payroll tax. The deferral period began as soon as the CARES Act was signed into law and runs through December 31, 2020. The amounts will ultimately have to be paid over to the Treasury in two installments: half of the deferred amount of payroll taxes from 2020 will be due December 31, 2021, with the remaining half due December 31, 2022. The Social Security Trust Fund will be held harmless by way of transfers from the general fund, as if the payroll tax payments were never deferred.

However, employers who received Small Business Administration loans that were forgiven under the CARES Act are not eligible for this payroll tax deferral. This is because the federal government effectively gave them cash that they did not have to pay back to fund as much as eight weeks of their payroll costs.