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.
Jeremy R. Newell is executive managing director, head of regulatory affairs and general counsel of The Clearing House Association.
André Christ is co-founder and co-CEO of LeanIX. André's passion lies in enabling organizations and their employees to build better products by moving to a modern IT architecture. Before André co-founded LeanIX, a software-as-a-service vendor, he gained extensive experience as a management consultant at the world’s largest logistics company. In this role, he advised CIOs and IT leaders on strategic topics at the interface of business and IT. Projects included the execution of a global IT complexity reduction program and the definition of an IT service and cost charging model for their world-wide data centers. During his studies of information science in Germany and France, he built modern software architectures for both startups and large enterprises. He is a global thought leader and has spoken at several high-influence industry events including Gartner’s EA Summit, Hamburger IT Strategy Days and Rethink! IT.
Paulina Gonzalez-Brito is executive director of the California Reinvestment Coalition.
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.
