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How to Repay Deferred Social Security Taxes If You’re Self-Employed

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed those who are self-employed, as well as household employers, to defer the payment of certain Social Security taxes on their Form 1040 (2020 tax year) over the next two years. Half of the deferred Social Security tax is due by the end of this year (2021). Payments made by January 3, 2022, will be considered on time, however, since December 31 is a holiday. The remainder is due by December 31, 2022. If the deferred Social Security taxes are not repaid on time, penalties and interest will apply to any unpaid balance.  

How To Repay The Deferred Social Security Taxes

If you are self-employed, you can pay the deferred tax amount any time on or before the due date. Be sure to follow these IRS guidelines:

  1. Make payments through the Electronic Federal Tax Payment System (EFTPS) or by credit or debit card, money order, or with a check.
  2. Separate your payments from other tax payments to ensure they are applied to the deferred tax balance on the tax year 2020 Form 1040. The IRS systems won’t recognize the payment for deferred tax if it is with other tax payments or paid with the current tax form.
  3. Designate the payment as “deferred Social Security tax.”

If you use the Direct Pay option, you should select the reason for payment as “balance due.” For those using the Card Program to pay with a debit or credit card, select “installment agreement.” Be sure to apply the payment to the 2020 tax year and not this year’s return.

Unable to Pay in Full by The Due Date? Here’s What You Should Do.

If you are unable to pay the full deferred tax amount by the installment due date, you should pay whatever you can to limit penalty and interest charges.

The IRS will send a balance due notice if the installment amount is not paid in full. You should follow the instructions on the notice for making a payment or apply for an IRS payment plan.

For additional information on ways to pay, you can visit the Paying Your Taxes page at IRS.gov, or you can contact Tax Defense Network to explore your deferred Social Security taxes repayment options. Call 833-803-4222 to schedule a free consultation today!