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.
Jen Andre is a senior director at Rapid7. Previously she was the founder & CEO of Komand (which was acquired by Rapid7). Before that, she co-founded Threat Stack, a pioneering cloud security monitoring company. Jen has spent her career in security operations and product development, starting off in the SOC as an analyst and later working as a researcher and developer at security companies Mandiant and Symantec.
Andy Ruggles is the national practice leader in PwC’s national Tax Reporting & Strategy practice with a focus on leading clients and teams in the use of process and technology in the tax reporting, analysis and compliance process.
Carrie Duarte is a partner and Workforce of the Future & Human Resources M&A leader at PwC. With over 20 years of experience consulting to large complex global companies and private equity firms, Carrie leads PwC’s Workforce of the Future platform, helping organizations develop and implement strategies to optimize the impact of the technological, social, and demographic disrupting trends on their workforce strategy, workforce performance and experience, and workforce environment. In addition, she leads the PwC US HR Transaction Services practice which advises clients on workforce aspects of acquisitions, divestitures, business restructuring and capital events. She is an actuary and dedicated client service partner.
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.
