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.
Seth Berman is head of Privacy and Data Security practice group at Nutter McClennen & Fish LLP. Prior to joining Nutter, Seth worked for 10 years at a leading cyber security investigations firm where he oversaw data breach and hacking investigations. Earlier, he served as an assistant US Attorney in Massachusetts where he prosecuted, among other things, numerous individuals and criminal gangs for identity theft. In addition to his work at Nutter, Seth currently teaches cyber criminal law at Harvard Law School.
Littler Mendelson is a law firm specializing in employment, employee benefit, executive compensation, and labor law matters. © 2017 Littler Mendelson. All Rights Reserved. LITTLER MENDELSON®, is a registered trademark of Littler Mendelson, P.C.
Mac McMillan is president and chief strategy officer of CynergisTek, a cybersecurity consultancy and service firm.
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.
