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.
Collin Canright is a marketing consultant for the fintech industry.
Jorbin is the central region compliance officer with HUB International.
John Horodyski is a partner with Optimity Advisors with executive management strategy experience in information management including digital asset management (DAM), metadata and taxonomy design, content strategy, governance, rights management and brand strategy. John has provided strategic direction and consulting for a variety of Fortune 100 and 500 clients from consumer packaging goods, to media and entertainment, and the pharmaceutical industry. John is also an adjunct faculty member at San Jose State University where he teaches a graduate course in didgital asset management. In addition to regular training and public speaking on digital media and metadata, John is a board member and editor of the Journal Of Digital Media Management, and is a monthly DAM contributor to CMS Wire. John recently published in May 2016 his book, “Inform, Transform, Outperform: Digital Content Strategies to Optimize Your Business for Growth.”
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.
