The Internal Revenue Service released information on how employees now have until the end of the year to repay any payroll taxes they deferred from last year.
Former President Trump issued a presidential memorandum last August allowing Social Security taxes to be deferred for the rest of 2020, but under the order they had to be repaid by April 30, 2021. The coronavirus relief package that Congress passed last month extended the repayment period until the end of this year.
Relatively few companies actually implemented the payroll deferral for their employees because there was no guarantee that the deferred payroll taxes would ultimately be forgiven by Congress. However, federal employees and military service members were still required to accept the payroll tax deferral, meaning those taxpayers will be facing smaller paychecks later this year.
Rich Gardner is principal security architect at XM Cyber. He has over 20 years of IT experience, with the last 19 years focused on InfoSec and helping telecommunications companies and financial services industry leaders in developing infrastructure and public cloud security architectures and approaching security needs with defense and offensive mindset. Prior to XM Cyber, Rich got his start in information security in 2000, at Global Crossing as a senior security architect. He also worked as a senior security consultant and architect for AT&T, consulting with customers like BNY Mellon, State of Texas, City of LA, ABC Broadcast, and Disney on several large and complex security solutions. Rich has his CISSP, CISM, CGEIT, AWS-SAS while currently pursuing other security certifications. In his spare time, Rich is a black belt in Japanese Jiu Jitsu and is a blue belt in Gracie Jiu Jitsu.
Mathias Golombek is chief technology officer at Exasol.
Daniel J. Thrailkill, CPA, is a director in Ellin & Tucker’s Tax Department with nearly two decades of tax planning, compliance and consulting expertise with privately held business owners and high net worth individuals. He can be reached at dthrailkill@ellinandtucker.com.
In Notice 2021-11, the IRS on Tuesday explained how employers who deferred payroll taxes on behalf of their employees can withhold and pay the deferred taxes throughout 2021 instead of just within the first four months of the year.
The deferral applied to employees who were paid less than $4,000 every two weeks, or an equivalent amount for other pay periods, with each pay period considered separately. The taxes, which are technically called Old Age, Survivors and Disability Insurance, or OASDI, are calculated at 6.2 percent of employees’ wages.
Notice 2021-11 makes changes to last year’s Notice 2020-65 to reflect the extended payment period. Payments made by Jan. 3, 2022, will be considered to be timely because Dec. 31, 2021, is a legal holiday. However, any penalties, interest and additions to tax will now start to apply on Jan. 1, 2022, for any unpaid balances
The IRS cautioned that employees could see their deferred taxes being collected immediately, so employees should check with their organization’s payroll point of contact on what their collection schedule will be.
