The Social Security tax is a crucial component of the U.S. social safety net, providing essential income to retirees, survivors, and disabled individuals. As part of the COVID-19 relief measures, employers and self-employed individuals were given the option to defer paying a portion of their Social Security tax liability for the 2020 tax year. However, it’s important to remember that this deferral wasn’t a forgiveness, and the second and final installment of the deferred amount is due on December 31, 2022. This article serves as a reminder for those who chose to defer and provides information on how to make the final payment.
What is Social Security Deferral?
In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed employers to defer paying the employer share of Social Security tax (6.2% of wages) for the remaining months of the year. Similarly, self-employed individuals could defer a comparable amount of their self-employment tax. This deferral option aimed to provide financial relief during the economic hardship caused by the pandemic.
However, it’s crucial to understand that deferral doesn’t mean forgiveness. The deferred taxes were simply postponed, not eliminated. The first half of the deferred amount was due on December 31, 2021, and the second and final installment is due on December 31, 2022.
Don’t Miss the Deadline
The IRS sent reminder notices to affected employers and self-employed individuals earlier this fall. However, it’s essential to remember that payment is due on time even if you didn’t receive a notice. Missing the deadline can lead to penalties and interest charges.
Making the Final Payment
There are several convenient options for making the final Social Security deferral payment:
- Electronic Federal Tax Payment System (EFTPS): This free service allows online payment through enrollment. Choose “Deferred Social Security Tax” and the applicable tax period on the Tax Type Selection screen. Visit EFTPS.gov for details.
- Direct Pay: This option is available only to self-employed individuals for direct payments from a checking or savings account. Select “Balance Due” on IRS.gov/payments/direct-pay and apply the payment to the 2020 tax year.
- Debit Card, Credit Card, or Digital Wallet: Choose “installment agreement” when paying with these options. Apply the payment to the 2020 tax year. Note that authorized third-party processors may charge fees. Visit IRS.gov/Payments for details.
- Check or Money Order: Make checks payable to “United States Treasury,” not the IRS. Refer to Instructions for Form 941 for mailing information.
Remember
- Make the payment separately from other tax payments to ensure proper crediting and avoid follow-up notices.
- Apply the payment to the 2020 tax year where the deferral occurred.
- The IRS does not charge fees for card or digital wallet payments, but third-party processors might.
If you chose to defer your Social Security tax in 2020, don’t wait until the last minute to make the final payment. Choose a convenient method and ensure timely submission to avoid any potential penalties. For further information or assistance, visit the IRS website or consult with a tax professional.
By understanding the Social Security deferral program and taking action before the deadline, you can ensure your tax compliance and contribute to the important role Social Security plays in supporting individuals and communities.
