Self-Employed Deferred Social Security Taxes

Post Date: 7/21/21
Last Updated: 7/21/21

Summary

Cross References
irs.gov

The CARES Act allowed eligible employers and self-employed individuals to delay the deposit of the employer’s share of Social Security taxes for the period beginning on March 27, 2020 and ending before January 1, 2021. 50% of the amount deferred is due by December 31, 2021, and the remaining 50% is due by December 31, 2022. Employers repay the deferred amounts by increasing their payroll tax deposits by the deferred amounts. Self-employed individuals repay the deferred amounts through their estimated tax payments.

For self-employed individuals, the amount potentially eligible for deferral is calculated in Part III of the 2020 Schedule SE (Form 1040). Line 26 of Schedule SE is then included on Schedule 3 (Form 1040), line 12e to calculate the actual amount of self-employment tax payments that is deferred.

The amount from line 26 of the 2020 Schedule SE is also used to figure the amount of deferred self-employment tax payments that must be repaid in 2021 and 2022. The repayment amounts are split equally between 2021 and 2022. However, the maximum deferral amounts are used to figure the equal repayment amounts, not the amount that was actually deferred.

Example: Mark is self-employed and had a maximum deferral amount reported on line 26 of his 2020 Schedule SE equal to $6,000. However, the actual amount he deferred on Schedule 3 of his 2020 Form 1040 was $4,000. His first repayment amount due by December 31, 2021 is $1,000 and his second repayment amount due by December 31, 2022 is $3,000.

Author's Comment: Note that the due dates are December 31 of each year, not the filing deadlines for the 2021 and 2022 tax returns. The repayments may be reconciled on the 2021 and 2022 tax returns, but the actual repayments must be timely paid through estimated tax payments.

Online payments. The IRS recently posted information on how self-employed taxpayers can repay the deferred taxes online. Individuals can repay the deferred amount any time on or before the due date by making payments through the Electronic Federal Tax Payment System (EFTPS), or by credit or debit card, money order, or with a check by going to https://www.irs.gov/payments

Payments should be separate from other tax payments to ensure they are applied to the deferred tax balance on the tax year 2020 Form 1040 since IRS systems won’t recognize the payment for deferred tax if it is with other tax payments or paid with the current Form 1040. Designate the payments as “deferred Social Security Tax.”

Individuals making deferred Social Security tax payments in EFTPS should select 1040 US Individual Income Tax Returns and deferred Social Security tax for the type of payment. They must apply the payment to the 2020 tax year where they deferred the payment. For details, go to https://www.eftps.com/eftps/
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