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.
Omar Hamidi is a consultant for 2BM, a leading IT consultancy based in Denmark.
Russell Berger is vice president of IT and network services at InTouch Health, and was instrumental in securing the vendor’s HITRUST CSF Certified designation in December 2017.
Johannes-Tobias Lorenz leads McKinsey’s work in digital insurance in Europe, helping insurers build their digital strategies, expand and serve direct markets, and strengthen their customer-service experience.
He also oversees the firm’s global customer experience for financial-services activities, helping financial institutions around the world transform the ways they meet the needs of increasingly demanding customers.
Some of his recent client work includes building a digital strategy for a leading global insurer and helping launch direct insurance players in Germany and other European markets. He also assists clients across Europe in areas such as social-media strategy and digital enablement of the tied-agents channel. Other projects include working with a number of insurers to digitize their customer journey for processes such as claims, life-insurance onboarding, and auto-insurance sales.
Furthermore, Lorenz helps private-equity firms on due diligences and portfolio work.
Lorenz has coauthored several McKinsey articles about issues confronting the insurance industry, such as insurance fraud and digital transformation.
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.
