Earlier today, President Trump signed the Paycheck Protection Flexibility Act (“PPFA”), making certain changes to the Paycheck Protection Program enacted as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in March.  Section 4 of the PPFA amends Section 2302(a) of the CARES Act to delete section 2302(a)(3).  Accordingly, employers who obtain forgiveness of a Paycheck Protection Program (“PPP”) loan may now defer all employer social security tax deposits that would otherwise be required to be deposited before January 1, 2020.

Under Section 2302 of the CARES Act, employers may significantly defer the deposit of the employer share of social security taxes (but not Medicare taxes).  Specifically, all employer social security taxes otherwise required to be deposited between the date of enactment and December 31, 2020, are not required to be deposited on the normal deposit schedule.  Instead, half of such taxes would be required to be deposited by December 31, 2021.  The remaining deferred social security taxes would be required to be deposited by December 31, 2022.  However, Section 2302(a)(3) of the CARES Act precluded an employer who obtains forgiveness of a PPP loan from taking advantage of the employer social security tax deferral.  The IRS issued FAQs that clarified that an employer that obtains a PPP loan may defer the deposit of employer social security tax up until such time as the employer is notified that some or all of the PPP loan will be forgiven.  After enactment of the PPFA, this prohibition will no longer apply and PPP loan recipients will be able to take advantage of the deferral without regard to whether the employer has a PPP loan forgiven.

For more information regarding the changes that the PPFA made to the PPP, visit Inside Government Contracts.

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Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden advises companies on their obligations under FATCA and assists in the development of comprehensive FATCA and Chapter 3 (nonresident alien reporting and withholding) compliance programs.

Mr. Chittenden advises large employers on their employment tax obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, the voluntary correction of employment tax mistakes, and the abatement of late deposit and information reporting penalties. In addition, he has also advised large insurance companies and employers on the Affordable Care Act reporting requirements in Sections 6055 and 6056, and advised clients on the application of section 6050W (Form 1099-K reporting), including its application to third-party payment networks.

Mr. Chittenden counsels clients on mobile workforce issues including state income tax withholding for mobile employees and expatriate and inpatriate taxation and reporting.

Mr. Chittenden is a frequent commentator on information withholding, payroll taxes, and fringe benefits and regularly gives presentations on the compliance burdens for companies.