The federal CARES Act is known for its small-business loans, but a lesser known provision offers payroll tax relief, too. Did you know that employers are allowed to defer paying the employer portion of Social Security taxes on 2020 wages? This measure is good news for ministries that could use extra money right now.
Deferred, Not Forgiven
The Coronavirus, Aid, Relief and Economic Security Act, which took effect March 27, is designed to provide temporary relief from the financial toll of the coronavirus pandemic. It doesn’t eliminate 2020 payroll taxes; it only defers their payment. Ministries that accept this payroll tax relief in 2020 will need to pay back the IRS over the next two years. Half of their 2020 payroll tax obligation is due at the end of 2021; the rest is due at the end of 2022.
What does this mean for my ministry?
This provision allows your ministry to use the deferred funds for more immediate expenses during the economic downturn created by the coronavirus pandemic. If your ministry decides to pursue this option, it will need to set aside funds in the future for repayment. Before electing this tax deferral option, your ministry is encouraged to speak with its accountant or another tax professional to determine whether it is in the ministry’s best interest to elect to take advantage of this option.
Who is eligible?
Every business qualifies for this tax deferral. However, organizations funded through the CARES Act Paycheck Protection Program lose eligibility once their loan is forgiven. Ministries that seek a PPP loan may defer paying the employer’s share of Social Security taxes from March 27, 2020, until the date loan forgiveness is granted. After that, the ministry has until the end of 2022 to repay its deferred payroll tax obligation.
How can I request this tax deferral?
If you’re a MinistryWorks customer and you’d like to set up this deferral, please reach out to your dedicated payroll specialist. If you’re not yet a customer, learn how MinistryWorks could help your ministry save money and simplify payroll by calling 866-215-5540.
Where can I learn more?
Updated May 13, 2020
The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.