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.
Olivia Zhao is a business and global affairs student at Georgetown University and a research assistant at the Psaros Center for Financial Markets and Policy, McDonough School of Business.
Trevor Chapman is a seasoned communications professional with expertise in media relations, public relations, and crisis management. As the former Director of External Communications at Farmers Insurance (2014–2023), he led high-profile strategies to shape the company's public image, including serving as a spokesperson during key business decisions. Trevor is passionate about helping organizations tell authentic stories, enhance reputation, and achieve measurable results through innovative communication solutions. Trevor holds a Journalism degree from California State University, Northridge (CSUN). Since 2018, Trevor has served on the Public Relations Advisory Council for the Journalism Department at CSUN, contributing his expertise to guide curriculum and support student development. (LinkedIn)
Matt Polak is the CEO of Picnic, a digital privacy and cybersecurity company at the intersection of personal data exposure and enterprise risk. He received an MBA from the UCLA Anderson School of Management and a BA in International Affairs from James Madison University.
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.
