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Intuit

How to set up Employee Social Security Deferral in QuickBooks

Learn how to set up the Employee Social Security Deferral in QuickBooks payroll products.

With QuickBooks and Intuit payroll, you can offer the option for your employees to participate in the Employee Social Security Deferral as outlined in the Presidential Memorandum issued August 8, 2020.

For more details about the social security deferral, see our Employee Social Security Deferral FAQ.

Important: Employers may choose to offer the deferral to their employees or not. This is a deferral only, so any amounts not withheld from September 1, 2020 through December 31, 2020 need to be repaid by April 30, 2021. Employers are obligated to remit the total applicable taxes deferred regardless of whether they are able to withhold those amounts from their employees’ paychecks from January 1, 2021 through April 30, 2021. Otherwise, interest, penalties, and additions to tax will start accruing on May 1, 2021.

If your employee is no longer employed with you, per the IRS guidance, you as the business owner are still liable for the deferred tax. You should make arrangements to recover the amounts from the employee

Follow steps for your version of payroll.

Note: Not sure which payroll service you have? Here's how to find which payroll service you have.

Step 1: Mark the employee for the Social Security deferral

Once you determine that you will offer to defer the tax, and your employee opts in, edit your employee to defer their portion of Social Security taxes.

  1. Go to the Payroll then the Employees tab.
  2. Select the employee you want to enable Social Security tax deferral.
  3. Select Edit ✎ next to Pay.
  4. Under What are [employee name] withholdings? select Edit ✎.
  5. Select the box named Employee Social Security deferral.
  6. Select Done twice.

When you create your next payroll, paychecks you create for these employees will automatically defer the employee portion of Social Security. The employee will see the increase to their net check amount. Your employer federal tax liability will also be reduced by any deferred amounts.

Step 2: Deduct and re-pay the deferred tax amounts

Deferred amounts must be remitted directly to the IRS on or before 4/30/2021, or interest, penalties, and additions to tax will begin to accrue starting on 5/1/2021. Check back later for information about how to collect and pay the deferred tax amounts.

Once you determine that you will offer to defer the tax, and your employee opts in, edit your employee to defer their portion of Social Security taxes.

Step 1: Set up the employee for the Social Security deferral

  1. Go to Employees and select the employee you want to enable Social Security tax deferral.
  2. In the Taxes & Exemptions section, select Edit.
  3. Select the box named Employee Social Security deferral then select OK.

When you create your next payroll, paychecks you create for these employees will automatically defer the employee portion of Social Security. The employee will see the increase to their net check amount. Your employer federal tax liability will also be reduced by any deferred amounts.

Step 2: Deduct and re-pay the deferred tax amounts.
Deferred amounts must be remitted directly to the IRS on or before 4/30/2021, or interest, penalties, and additions to tax will begin to accrue starting on 5/1/2021. Check back later for information about how to collect and pay the deferred tax amounts.

Contact us to enable the Employee Social Security deferral for your employees.

Step 1: Set up payroll items to track the deferral

Once you determine that you will offer to defer the tax, and your employee opts in, you’ll need to set up the payroll item to track this Social Security deferral on paychecks.

Add a payroll item:

  1. Go to the Employees menu, then Manage Payroll Items. Then, select New Payroll Item.
  2. Select Custom Setup, then select Next.
  3. Select Addition (Employee Loan, Mileage Reimbursement), then select Next.
  4. Enter a name such as EE Social Security Deferral, then select Next.
  5. Select COVID-19 Expenses from the ▼ dropdown, then select Next.
  6. Select the EE Social Security Deferral tracking type from the ▼ dropdown.
    Note: If you don’t see that tax item, update your tax tables.
  7. Select Next twice.
  8. In the Calculate Based on Quantity window, select Neither, then select Next.
  9. Select gross pay, then select Next.
  10. Select Finish.

Set up the payroll item to track the deferral credit on the liability check:

  1. Go to the Employees menu, then Manage Payroll Items.
  2. Select New Payroll Item.
  3. Select Custom Setup, then select Next.
  4. Select Other Tax, then select Next.
  5. Select EE Soc. Sec. Deferral Credit from the ▼ dropdown.
    Note: If you don’t see that tax item, update your tax tables.
  6. Select Next twice.
  7. In the Agency for company-paid liability window, find the Agency field.
    Choose Internal Revenue Service or IRS from the ▼ dropdown.
  8. In the "Enter the number that identifies you to the agency" field, enter your Federal EIN.
  9. Select COVID-19 Expenses in the Liability and Expense account ▼ dropdowns.
  10. Select Next twice then select Finish.

Step 2: Run a regular payroll
The employee’s portion of Social Security will continue to calculate and show on their paycheck. To adjust for the amount, on your next scheduled payroll add the new payroll item you just created with the amount of Social Security withholding that is being deferred on the paycheck. Here's how.

  1. Select Employees, then Pay Employees.
  2. (Skip to step 3 if you need to run an unscheduled payroll). Select the appropriate schedule in the Create Paychecks section, and select Start schedule payroll.
  3. Verify the Pay Period Ends date, Check Date, and Bank Account the money is drawn from.
  4. Place a checkmark next to each employee you're applying this to and select Open Paycheck Detail.
    Note: If you're not sure which employees are eligible for this deferral, see our Employee Social Security Deferral FAQ.
  5. Review or enter the normal earnings, addition, or deductions.
  6. In Other Payroll Items, leave your normal deductions, and in the first free row, add EE Social Security Deferral. In the Rate field enter the Social Security Employee amount from the Employee Summary box.
  7. Select Save & Next to go to the next employee, or select Save & Close to go back to the Enter Payroll Information window.
  8. Finish and send your payroll as normal.

Note that you can't defer Social Security on prior paychecks paid to the employee.

Step 3: Adjust your tax payments

QuickBooks Desktop Payroll Assisted

When you create payroll using the Employee Social Security Deferral payroll item you created, and send payroll to Intuit, a payroll liability check automatically posts to your check register in QuickBooks Desktop. This liability check will automatically include your Employee Social Security deferral. In January, 2021, follow Step 4 below to collect and pay the deferred amount.

QuickBooks Desktop Payroll Standard and Enhanced

Create a report to find out how much employee Social Security you have deferred. Then, when paying your taxes, adjust the liability check for this deferred amount to reduce your payment.

Part 1: Determine the amount of employee social security that was deferred

  1. Select Reports at the top of the page
  2. Select Employees and Payroll, then More Payroll Reports in Excel.
  3. Select Payroll Summary by Tax Tracking Type.
  4. Select Enable Content.
  5. Select the date range for your liability payment then select Get QuickBooks Data.
  6. Select Tax Tracking Type ▼ dropdown and uncheck Select All. Choose EE Social Security Deferral.
  7. Use the amount in the Total column enter onto the liability check in the next step.

Part 2: Create a check to pay the tax liabilities

  1. Go to the Employees menu, then select Payroll Center.
  2. Select the Pay Liabilities tab.
  3. In the Pay Taxes & Other Liabilities section, mark the Federal 941/944/943 then select View/Pay.
  4. In the Liability Payment window, go to the Payroll Liabilities tab. Select the Payroll Item ▼ dropdown,  in the next free row, enter the EE Soc. Sec. Deferral Credit payroll item and the amount from the report as a negative. Select Recalculate to adjust the liability.
  5. Select Save & Close. E-pay the payment as normal.

Step 4: Deduct and re-pay the deferred tax amounts.
Deferred amounts must be remitted directly to the IRS on or before April 30, 2021. Otherwise interest, penalties, and additions to tax will begin to accrue starting on May 1, 2021.

You have two options to the collect the deferred amounts back from your employees:

Option 1: Set up an after tax deduction to add onto paychecks between 1/1/2021-4/30/2021.

  1. Go to the Employees menu, then Manage Payroll Items, then select New Payroll Item.
  2. Select Custom Setup, then select Next.
  3. Select Deduction, then select Next.
  4. Enter a name such as EE Social Security Repay, then select Next.
  5. In the Agency for company-paid liability window, find the Agency field. Choose Internal Revenue Service or IRS from the ▼ dropdown.
  6. In the Enter the number that identifies you to the agency field, enter your Federal EIN.
  7. Select Payroll Liabilities in the Liability account ▼ dropdown, then select Next.
  8. Select None from the ▼ dropdown.
  9. Select Next twice.
  10. In the Calculate Based on Quantity window, select Neither, then select Next.
  11. Select net pay, then select Next.
  12. Select Finish.

Option 2: If you prefer to collect these funds outside of your payroll service, you can make arrangements with your employees directly.

Once you have collected the tax amounts, repay the deferred amounts to the IRS. To make these payments you will need to log into the IRS website and make all deferred payments no later than 4/30/2021.

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