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.
Mathieu Benoit has 15 years of experience in investment accounting. He is currently working as a consulting lead at Eagle Investment Systems, where he helps clients adopt Eagle’s Accounting platform. He began his career working for Standard Life in their fund accounting operations. In 2010 he became an independent consultant specialized in investment system conversions with a number of those clients migrating off legacy technology and moving to the Eagle platform. He earned his CPA in 2007 and has a wide range of expertise including investment system conversion, investment accounting, data management, derivatives and NAV calculation.
Kim Lochridge is executive vice president for Engineered Tax Services Inc., a provider of specialty tax services. Prior to joining ETS, she spent over a quarter of a century in entrepreneurship, with roles within the real estate and energy industry. She is also a frequent speaker in the tax, investment, private wealth, and family office spaces.
David Stevens is the CEO of Mountain Lake Consulting. He is the former CEO of the Mortgage Bankers Association and a former FHA commissioner.
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.
