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Repaying Deferred Social Security Tax

Repaying Deferred Social Security Tax

For self-employed taxpayers and household employers, it’s time, as they say, to pay the piper.

The CARES Act—also known as the Coronavirus Aid, Relief and Economic Security Act—gave these specific taxpayers permission to defer paying certain Social Security taxes for tax year 2020.

"Defer" is the operative term; this change did not eliminate the need to pay Social Security tax owed. Half of the deferred Social Security tax is due by Dec. 31, 2021; the other half is due in Uncle Sam’s pockets by Dec. 31, 2022.

The deferred taxes can be paid any time on or before the due date.

What are the options for repayment of Social Security tax?

The IRS says taxpayers wishing to repay Social Security taxes can use the Electronic Federal Tax Payment System (EFTPS) or pay with a credit or debit card, money order, or check. Further, the agency stresses these payments:

  • Should be separate payments 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.
  • Should designate the payment as "deferred Social Security tax."

Those paying deferred Social Security tax using EFTPS should select 1040 US Individual Income Tax Returns and set the type of payment to deferred Social Security tax.

The payment should be applied to the 2020 tax year, since that’s where the payment was deferred.

Another payment option is to set up a same-day wire transfer of funds. Keep in mind, however, this option may entail a bank fee to complete. Some other electronic options for paying taxes, such as Electronic Funds Withdrawal or IRS Direct Pay, may not apply to this type of payment.

For more information on the payment of deferred taxes, go online to EFTPS.gov.

What if a taxpayer is unable to pay in full?

Taxpayers unable to pay the complete amount of deferred tax are advised to pay whatever they can by each of the two due dates to limit penalty and interest charges.

Taxpayers get a balance-due notice from the IRS if they don’t pay the full installment amount. To make a payment or to apply for an IRS payment plan, follow the directions given in the notice.

For more information on ways to pay, what to do when taxpayers can’t pay and viewing their tax account, visit the Paying Your Taxes webpage on IRS.gov.

Sources: How self-employed individuals and household employers repay deferred Social Security taxPaying Your Taxes.

Bob Williams

Forget genes; I’ve got words in my DNA. Communication has been part of who I am nearly all my life. From a long career in radio news to another one in newspapers – and a University of Georgia journalism degree sandwiched between the two – language has been my life. I’ve also been fortunate to have learned the tax business from the ground up here at Drake, starting with 1040.com online forms some years ago before moving on to work on the Web. In all things tax-ish, we aim to give you tools you can use.

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