Presented by Paystrubmakr.com By John Wolf and Tom Cullen CPA
Coronavirus Relief Act,
- The Coronavirus Relief Act came to help employers that are small business owners, giving them the option to postpone social security payments for this year to 2021 and 2022.
- The workers pay payroll taxes 12.4% by deduction of 6.2% of their paychecks for Social Security, and the employers add their share of 6.2%. The tax on Medicare 2.9% is shared 1.45% by workers and 1.45% by employers. Topic No. 751 Social Security and Medicare Withholding Rates
- As a small business owner under the pressure of lockdowns and slow sales, you may need this opportunity to keep cash in your hands. Do not forget that this is a loan that will bite you in the coming years.
If you took the option to defer your 6.2% social security payroll taxes, you would have to pay half of it until the end of 2021. The second half will have to be paid before the end of 2022.
The simple math shows how the look like a small amount becomes bigger and bigger. A small business that pays a $1,000 weekly wage will accumulate $2,418
You can see the Year to Period on our website Pay tub generator.
It will give the business some cash to pay the payroll itself or other bills and the yet pending $1.45% medicare.
It may be that you will need more experts’ advice to get the best of the Coronavirus Relief Act.
There is the loan aspect that you may ask your bank advice about it. Maybe it will be better to take a loan and pay your obligations while paying back is longer than two years.
There is an issue with employment law that you will have to see your lawyer avoid legal problems and attorney costs in the future. The Last aspect is the taxation issues that may come while the deferment is done.
Deferring payments do not make them disappear. They are there to be paid together with the present payments. A small business owner will need to learn if he will set aside enough money for the time he will need to pay his taxes—2020 taxes concurrently with 2021 and 2022 obligations.
The cash that was not paid should be used carefully considering that the coming years may still be a hard time for recuperation from the Coronavirus health and economic damages. Small Business Forecast 2021: Four Ways Small Business Employers Win The War For Talent
It may be better to pay your taxes on time and not finding yourself with the IRS as your creditor in the case that you spent the cash you got as a result of the Coronavirus Relief Act.
Disclaimer: John Wolf and paystubmakr.com are making a total effort to offer accurate, competent, ethical HR management, employer, and workplace advice. We do not use the words of an attorney, and the content on the site is not given as legal advice. The website has readers from all US states, which all have different laws on these topics. The reader should look for legal advice before taking any action. The information presented on this website is offered as a general guide only.