Repaying Deferred Social Security Tax

Some taxpayers may have chosen to defer a portion of their self-employment tax that was due as part of their 2020 federal income tax return.  This was discussed on pages 30 to 32 of the 2020 edition of the Tax Year 2020 M+O=CPE Individual Tax Year-End Workshop Reference Book. 

This deferral was also available for the employer-share of the Social Security portion of the self-employment tax due from March 27, 2020 through December 31, 2020.  (The deferral was also available for the employer-share of Social Security for compensation for household employers that is reported on Schedule H, Household Employment Taxes.)

The first half of any such deferred Social Security tax is due on December 31, 2021, and the second half is due on December 31, 2022. 

While many interpreted that this repayment would be made as part of the normal income tax payments made by taxpayers via withholding and/or estimated tax payments for the applicable tax year, the IRS recently announced that the payments of the deferred Social Security tax must be made separately from other income tax payments and should not be included in withholding, quarterly estimated tax payments or payments made with the current Form 1040. 

The IRS has indicated that taxpayers can make payments of the deferred Social Security tax using the Electronic Federal Tax Payment System (EFTPS) or by check.  Taxpayers should indicate that such payments are for “deferred Social Security tax.”  The IRS will send a bill to taxpayers who do not pay the first half of the deferred Social Security tax by December 31, 2021, and such bills will include penalties and interest.