The COVID-19 pandemic disrupted every part of our lives. Even 18 months on, the pandemic continues to evolve and rage. Business owners continue to decide if they keep employees or close permanently.
The federal government responded with programs to help business owners recover and stay open. Most importantly, these programs help keep people employed.
About 70% of business owners would take advantage of PPP loans, payroll tax relief, and other programs. These influence other decisions, like layoffs and staying open.
If you want to know what it is and how it works, keep reading to find out.
What Are Payroll Taxes?
Payroll taxes are the taxes withheld from employees’ earnings and submitted to the IRS. Employers withhold income taxes, 6.2% for Social Security, and 1.45% for Medicare. The employer matches the Social Security and Medicare contributions as part of payroll taxes.
Self-employed people contribute both the employee’s and employer’s share of Social Security and Medicare, which add up to 15.3%. They also pay federal income taxes.
What Is Payroll Tax Relief?
The CARES Act of March 2020 was a massive bill designed to prevent accounting software catastrophe during lockdowns. There are a couple of provisions in the bill that include payroll tax relief, along with PPP and EIDL loans.
One section of the bill allowed businesses and self-employed individuals to defer their portion of Social Security taxes between March 27, 2020, and December 31, 2020.
Don’t think that it’s free money. This is a deferment, which is paid back. The first installment is a 50% payment due by December 31, 2021. The second payment gets made by December 31, 2022.
This is a way to get payroll tax relief and catch up as the economy recovers. Unfortunately, you’d have to had taken advantage of this during the 2020 tax year.
In the other COVID relief bill that was passed in December 2020, legislators included another payroll tax relief provision.
The Employee Retention Credit is a tax credit that’s refundable based on Social Security payments made between January 1, 2021 and June 30, 2021.
How to Claim Payroll Tax Relief
The laws around COVID-19 relief change regularly. Not just at the federal level, but at the state level as well. As these laws evolve, it’s important to stay up to date on these changes.
The best way to know what you qualify for is to talk to someone who specializes in tax law. They can guide you and take the guesswork out of IRS payroll tax relief for you.
It beats guessing wrong and getting in tax trouble with the IRS.
Business Payroll Tax Relief
Payroll taxes are already confusing and time-consuming for many business owners. Payroll tax relief can help your business during the COVID-19 pandemic, but you have to know the deadlines and qualifications.
Talk to a tax professional to understand how you can maximize these benefits.
For more business and financial tips, be sure to check out the other articles on the blog today.