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.
Kevin Petrie is a senior director at Attunity and author of Streaming Change Data Capture: A Foundation for Modern Data Analytics.
Norbert Monfort is vice president of IT transformation and innovation at Assurant, which specializes in risk management. He is also an adjunct professor at Florida International University, where he teaches IT-related subjects.
Tobi Carter is a Checkpoint Editor/Author with the Thomson Reuters Tax & Accounting Business. In this position, she serves as in-house SEC expert. Prior to joining Thomson Reuters, Ms. Carter was an associate in the Corporate and Securities Law Practice Group at Certilman Balin Adler & Hyman, LLP for nearly five years. Before practicing at Certilman Balin, Ms. Carter was an attorney for two years in the Securities Litigation Group at Greenberg Traurig, L.L.P. Prior to that, she was Associate Counsel for two years at Oppenheimer & Co. Inc. Ms. Carter earned her Juris Doctor from New York University School of Law in 2001, where she served as Senior Staff Editor of the Environmental Law Journal. In 1998, she graduated from the University of California at Berkeley with a B.A., cum laude, in Legal Studies. Admitted to practice in the State of New York, Ms. Carter is a member of the American Bar Association, as well as its Business Law Section.
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.
