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.
Mike Fleck is vice president of security at Covata Limited, where he is responsible for managing and directing US operations and brand awareness, credibility and thought leadership related to data security and privacy. He joined Covata in 2017, by way of acquisition. In 2010, he co-founded CipherPoint Software and has since served as its CEO. In efforts to remove the complexity often accompanying cybersecurity, Mike is driving his clients to focus on reducing risk, not administering products. With nearly 15 years of experience in data security and encryption, Mike holds patents for transparent encryption and automated encryption key management. His vast experience with complex Fortune 500 and Federal Government environments includes leadership roles at Vormetric (acquired by Thales), High Tower Software (acquired by NetForensics), Predictive Systems (NASDAQ: PRDS), and Lockheed Martin.
Jennifer Prendki is vice president of machine learning at Figure Eight.
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.
