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.
Kevin Zolriasatain is a principal and the practice leader of KBKG’s Research and Development Tax Credit Services.
Christa Degnan Manning leads Bersin by Deloitte’s solution provider research. In this role, she collaborates with Bersin and Deloitte colleagues across practices to identify and analyze software and service providers that support and sustain success in human resources, workforce enablement, and organizational effectiveness. Christa’s research and advisory work helps businesses align their workforce support strategies with the right third-party partners and governance models to deliver functional capabilities and employee experiences that support productivity, engagement and workforce efficiency.
Matthew T. Hoesly, CFP, ChFC, MSFS, is an investment adviser at Resource 1 in Norfolk, Va. His focus is on areas of personal financial advice, retirement planning and asset management; playing a vital role in corporate employee meetings and educational seminars. Hoesly has qualified for Million Dollar Round Table every year since 2008 and has achieved five Court of the Table and two Top of the Table honors.
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.
