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.
Murray L. Harber is a human performance and employer health professional with over 30 years of experience. He is an entrepreneur, speaker, and writer passionate about improving health and well-being for individuals and within employers. He is the Executive Director of the Mississippi Business Group on Health. He holds a Bachelor's Degree in Education with an emphasis in Exercise Physiology from the University of Tennessee, Knoxville where he was awarded the Ben A. Plotnicki Award for dedication in the field.
Lakesha Williams is a wealth strategist, financial literacy advocate and chief empowerment officer at financial education platform Dear Lakesha.
Equipped with an MBA and more than 20 years of experience in the banking industry and specializing in wealth management, she is on a mission to empower and educate women seeking financial freedom and security.
Mike Manalac is a CPA with experience at small, Top 20 and Big Four accounting firms and industry-leading Fortune 500 companies. He is currently an accounting manager at Google, as well as the author and illustrator of the No Flux Given playbook. He also pioneered the introduction of the virtual whiteboard to the accounting world. Reach him at www.mikefromaccounting.com.
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.
