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.
Alec Herring, JD, CLU, CLMS, is an area SVP and employee benefits and absence and productivity consultant with Gallagher. He advises large employers on leave of absence, disability, accommodation, and workforce absence strategies and specializes in helping organizations balance compliance, employee experience, and operational efficiency, with a particular focus on the growing use of technology and artificial intelligence in leave and accommodation administration.
Amrish Singh is CEO and Co-Founder of Liberate AI.
Mark Klein holds the position of Chief Digital Officer (CDO) and is the member of the Board of Management at ERGO Group AG responsible for digitalisation, marketing and global partnerships. Having previously held senior positions in the telecommunications industry – including at Vodafone and Deutsche Telekom – he has been driving ERGO's digital transformation since 2016. His goal is to systematically transform ERGO into a digital-first company. Under his leadership, ERGO has made significant strides in digitalisation, notably by leveraging technologies such as artificial intelligence, voice technology, robotics, virtual reality and process mining. In addition, the strategic partnerships he has forged with leading global technology companies enable him to evaluate the latest digital trends. In terms of marketing, his focus is on strengthening the brand, enhancing customer experience and optimising performance marketing strategies to maximise ROI through data-driven campaigns. Through an innovative social media strategy, he strengthens the brand's visibility across digital channels.
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.
