Executive Summary
The end of the year can bring new opportunities for tax planning. Our Federal Tax Group explains how 2021 year-end or 2022 sellers in M&A transactions can consider accelerating deductions for payroll taxes deferred under the CARES Act.
The CARES Act allows employers to defer the deposit and payment of certain employer payroll taxes owed on wages paid from March 27, 2020, through December 31, 2020 (self-employment taxes incurred during this period can also be deferred). Fifty percent of the deferred payroll taxes must be paid by December 31, 2021, and the remaining 50% must be paid by December 31, 2022. December 31, 2021 and 2022 each fall on the weekend, so the due dates are actually January 3, 2022 and January 3, 2023 under the weekend/holiday rule under Section 7503, as confirmed by the IRS in a recent Chief Counsel Memo.
Generally, employers are allowed a deduction for their portion of the payroll taxes deposited and paid each year, but the timing of the deduction depends on the employer's method of accounting. For cash method taxpayers, the deduction is deferred until the deferred payroll taxes are deposited and paid. For accrual method taxpayers, the deduction is generally permitted...
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