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.
Diane Robinette is CEO of Incisive Software, a leading provider of spreadsheet risk intelligence solution. She has more than 20 years of experience in strategic planning, marketing, product management, business operations and management, and has worked in companies from start-up to large enterprises in various industries including high tech, aerospace and defense, telecommunications, financial services, and transportation.
Ken Krupa is CTO of MarkLogic.
Oren Eini, chief executive officer and founder of Hibernating Rhinos, has more than 20 years of experience in the development world with a strong focus on the Microsoft and .NET ecosystem. Recognized as one of Microsoft's Most Valuable Professionals since 2007, Oren is also the author of "Inside RavenDB." He frequently speaks at industry conferences such as DevTeach, JAOO, QCon, Oredev, NDC, Yow! and Progressive.NET. An avid blogger, you can also find him under his pseudonym as Ayende Rahien at http://www.ayende.com/Blog/.
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.
