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.
Richard A. Newman is a partner at Arent Fox LLP and advises clients in the areas of real estate and finance, with special emphasis on municipal finance, project finance, and the representation of nonprofit organizations.
By Kostas Tzoumas, co-founder and CEO of data Artisans and one of the original creators of Apache Flink. He is the co-author of Introduction to Apache Flink: Stream Processing for Real Time and Beyond.
Kelly Stirman is the vice president of strategy at Dremio. In this capacity, he oversees the planning, development and execution of Dremio’s strategic initiatives that are centered on messaging, brand awareness, customer satisfaction and business development. Previously he was VP of strategy at MongoDB where he worked closely with customers, partners, and the open source community. For more than 15 years he has worked at the forefront of database technologies. Prior to MongoDB, Kelly served in executive and leadership roles at Hadapt, MarkLogic, PeopleSoft, GE, and PricewaterhouseCoopers.
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.
