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.
Nathan Solheim is a Denver-based freelance writer.
David Mayer, CPA, is the national director of Engineered Tax Services. He works closely with the business development team and their CPA partners nationally in connection with ETS’s R&D Tax Credit Services. For the past decade, Mr. Mayer has worked with hundreds of CPAs across the country to assist their clients to claim millions of dollars in R&D tax credits. He has over 20 years of experience providing tax, mergers and acquisitions, and operational consulting services to corporations, partnerships and individuals throughout the U.S. Mr. Mayer has over 15 years of federal and state R&D tax credit experience. He has presented the R&D tax credit at various industry association functions – including the annual AICPA national conference on federal taxes in Washington D.C. Mr. Mayer is a Certified Public Accountant and a former Chairman of the M&A Tax Committee for the NYS Society of CPAs, Manhattan chapter. He is also a member of the AICPA and Beta Gamma Sigma. Mr. Mayer holds a Master in Taxation degree from Bentley College, graduating with high distinction. He also holds a B.S. in accounting from Fairfield University.
Samantha O'Neil is Head of Marketing for Fidelity Clearing & Custody Solutions.
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.
