How to repay deferred Social Security taxes

If you chose to defer employer or employee Social Security in 2020, the IRS requires you to repay deferred taxes in 2021. You'll find helpful IRS links and information about repayments in this guide

In this article

What do employers need to do?

If you deferred employer Social Security tax in 2020 you must repay deferred Social Security. Half of the total employer amount deferred must be repaid on or before January 3, 2022*. Repayment must be made outside of Wave, directly to the IRS.

If you deferred employee Social Security payments in 2020, you are required to withhold and repay the employee share of the deferred Social Security tax. Repayment must be made outside of Wave, directly to the IRS. You must also provide each employee who had 2020 taxes withheld in 2021 with a W-2C for tax year 2020. The full amount of employee deferred taxes must be repaid to the IRS on or before January 3, 2022*

Learn more in the IRS Guide: What employers need to know about repayment of deferred payroll taxes

When is repayment due?

January 3, 2022

*Note that the IRS has indicated that although the due date is December 31, 2021, payments will be considered timely if received by January 3, 2022 because of the observed holiday for New Year's Day in 2022.

  • 50% of the total employer-deferred Social Security from 2020 
  • 100% of the total employee-deferred Social Security from 2020

December 31, 2022

  • The remaining 50% of employer-deferred Social Security from 2020

How to calculate your employer-deferred Social Security repayment

To calculate your employer-deferred Social Security repayment, begin by calculating the total amount of employer Social Security tax deferred in 2020. Remember that only 50% of the total deferred amount is due by January 3, 2022*.

There are two ways to review the total amount of employer Social Security you deferred in Wave. You can pick either method to find the total employer-deferred Social Security from 2020.

Review the COVID-19 Hub

  1. Navigate to Payroll > COVID-19
  2. Under Tax Deferrals the total amount deferred appears under Social Security tax deferral (CARES Act)
  3. Remember that 50% of the total amount deferred is due January 3, 2022*. The remainder is due December 31, 2022.

Generate a Payroll Wage and Tax report for tax year 2020

  1. Navigate to Reports > Payroll Wage and Tax Report
  2. Set the Period to Other with a Start date 01/01/2020 and End date 12/31/2020
  3. Click Generate Report
  4. The total amount of employer Social Security deferred will appear in the Tax Liability column to the right of Social Security Tax Deferral (Employer Deferral). Because your tax deferral reduced the liability due in tax year 2020, it appears in the 2020 Wage and Tax report as a negative number.
  5. Remember that 50% of the total amount deferred is due January 3, 2022*. The remainder is due December 31, 2022.

Employers who deferred Social Security with a different payroll provider before joining Wave should review their 2020 Forms 941 from quarters 2, 3 and 4 (April through December) or their IRS deferral notices to determine the total amount of social security tax deferred.

How to calculate your employee-deferred Social Security repayment

The IRS has indicated that employers are responsible for repaying employee-deferred Social Security. The total amount of employee Social Security deferred in 2020 is due January 3, 2022*.

There are two ways to review the total amount of employee Social Security you deferred in Wave. You can pick either method to find the total employee-deferred Social Security from 2020.

Review the COVID-19 Hub

  1. Navigate to Payroll > COVID-19
  2. Under Tax Deferrals the total amount deferred appears under Employee’s Social Security tax deferral

Generate a Payroll Wage and Tax report for tax year 2020

  1. Navigate to Reports > Payroll Wage and Tax Report
  2. Set the Period to Other with a Start date 01/01/2020 and End date 12/31/2020
  3. Click Generate Report
  4. The total amount of employee Social Security deferred will appear in the Tax Liability column to the right of Social Security Tax Deferral (Employee Deferral). Because your tax deferral reduced the liability due in tax year 2020, it appears in the 2020 Wage and Tax report as a negative number.

How to repay deferred taxes

Repayments must be made directly to the IRS. 

Follow the instructions outlined by the IRS in Deferral of employment tax deposits and payments through December 31, 2020 for the employer deferral (see point 29) and What employers need to know about repayment of deferred payroll taxes to deposit your repayments for the employee deferral. Payments can be made via EFTPS, or another IRS payment method.

Wave cannot schedule the deferred Social Security repayments on behalf of employers.

EFTPS Tips

Make sure to follow the special instructions provided by the IRS when depositing repayment. Don’t include your repayment in the same deposit as 2021 taxes. Consult the IRS directly at EFTPS.gov, or call 800-555-4477 or 800-733-4829 for details.

Not sure where to start?
Learn how to enroll in the Electronic Federal Tax Payment System (EFTPS)

How to collect and report 2020 employee Social Security tax in 2021

IRS notice IR-2021-17 states employers can collect employee Social Security taxes deferred in 2020 between January 1 and December 31, 2021.

To withhold Social Security deferred in 2020 from a 2021 paycheck use the benefits and deductions tool to deduct an after-tax amount from your employee. This allows you to deduct an amount from your employee's pay which will not be reported on the 2021 W-2. Employers may also choose to collect employee-deferred Social Security taxes outside of Wave. 

You must issue a Form W-2C for 2020 to each employee you collect deferred 2020 Social Security Tax from in 2021. Form W-2C must be completed and filed outside of Wave. More information about reporting employee Social Security tax deferred is available in IRS Notice 2020-65.

How to bookkeep your repayment

If you use Wave Accounting, follow the instructions in [US] COVID-19: Bookkeeping your payroll tax credits and deferrals to ensure your repayments are properly recorded in your books.

FAQ

Am I able to repay before the due dates?

Yes. The IRS indicates that employers can repay deferred Social Security taxes before the specified due dates in What employers need to know about repayment of deferred payroll taxes.

I received a notice from the IRS about my repayments.

The notice is informational, confirming that the IRS is aware you deferred the employer share of Social Security taxes on a tax filing 2020. You will receive one notice for each filing you deferred employer Social Security on (for example, employers who deferred employer Social Security on Q3 Form 941 and Q4 Form 941 will get two: One for each Form 941 with an amount on Line 13b). Each notice will confirm which filing it relates to, the amount of tax deferred on the filing (which is the amount that must be repaid), and the repayment due dates. Remember that you will need to add up the total amount deferred on each notice to accurately calculate your total deferral. Immediate action isn’t required, unless you wish to repay the deferred taxes early, then you can take the steps outlined above in How to repay deferred taxes.