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.
Steve Johnson is the co-founder and head of product for insured.io. He has over two decades of experience in the insurance industry, working in multiple development and underwriting roles with P&C lines insurance companies.
Zachary Decker is a master of accounting student at the University of Northern Iowa and serves as a sergeant in the Iowa National Guard. He served as the president of the accounting clubs at the University of Northern Iowa and Des Moines Area Community College and held positions as Treasurer of the University of Northern Iowa's Veterans Association and Global Business Club. He recently accepted a position to start his accounting career at PwC in Austin, Texas.
Attila Toth is the founder and CEO of ZestyAI, a risk platform for property and casualty insurers. With over two decades of experience building high-growth businesses at the intersection of data and climate science, Attila has worked with insurers and regulators across the U.S. to scale AI adoption responsibly. Before founding ZestyAI, he held leadership roles at C3 AI and SunEdison and was a strategy advisor at McKinsey & Co.
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.
