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How the Pandemic Impacted Taxes for the Self-Employed

| December 29, 2021
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The Coronavirus Aid, Relief, and Economy Security Act (CARES Act) provides relief to self-employed people by delaying the Social Security tax payment due in 2020 for two more years. Specifically, individuals were allowed to defer 50% of the Social Security tax on self-employed income earned from March 27, 2020, through December 31, 2020. 

Concerned that many people might have trouble making these payments, the IRS issued an early reminder that half of any deferred Social Security tax is due on December 31, 2021. The other half will come due December 31, 2022.

Self-employed individuals may make these payments anytime on or before the due dates and in various manners, including by check or credit card. They can make payments through the Electronic Federal Tax Payment System, by credit or debit card, money order, or a check.

To ensure they're applied correctly, the payments should be noted as a "deferred Social Security tax" and made separate from other tax payments.

What should you do if you're unable to pay in full by the installment due date?

Individuals who can't pay the entire deferred tax amount should pay whatever they're able to pay by the installment due dates to limit penalty and interest charges.

If the installment amount isn't paid in full, the IRS will send the taxpayer a balance due notice. Taxpayers should follow instructions on the notice to make a payment or apply for a payment plan. They can also visit the Paying Your Taxes page on IRS.gov for additional information about ways they can pay, what to do when they can't pay, and viewing their tax account.

Tax laws are tricky, and the pandemic has made many things more confusing. Give us a call today so we can talk through strategies that might be beneficial if you're self-employed.

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This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.

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[1] https://www.azcentral.com/story/money/business/consumers/2021/07/18/what-know-how-covid-19-pandemic-changed-tax-laws/7978496002
[2] https://www.irs.gov/newsroom/how-self-employed-individuals-and-household-employers-repay-deferred-social-security-tax

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