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.
Gregg Bienstock is the Co-Founder of BKC Group, a market infrastructure and strategic advisory firm focused on the modernization of the municipal market. He was the Co-Founder and CEO of Lumesis, which was acquired by SOLVE. Earlier, Gregg held senior leadership roles at Ambac Financial Group. He advises financial institutions on data strategy, compliance architecture, digital infrastructure, and next-generation market systems, and is a frequent speaker on the role of technology in reshaping, modernizing, and re-architecting regulated markets.
Misty Megia is the head of accounting education and programs at TSheets.com, an employee time-tracking app on apps.com. She has over 20 years’ experience in market strategy, project management, public speaking, corporate branding, and channel marketing. Misty has driven success for companies across a variety of industries from hardware manufacturing to education and the accounting profession. Outside of her corporate life of travel and strategy, she is a performer, director and choreographer for live theater.
Kerpen focuses her practice on employee benefits tax and Employee Retirement Income Security Act matters related to 401(k), pension, health and welfare, and executive compensation plans, including designing, amending, and administering such plans.
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.
