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.
Joseph H. Neely is a former director of the FDIC and career banker. He is president of Neely and Associates, a consulting firm advising banks on regulatory and strategic matters.
Abby Salameh, chief growth officer at RFG Advisory, is a seasoned C-suite executive with extensive expertise in expanding financial advisory, alternative investment, fintech and financial services organizations, particularly those undergoing transformation.
She has held CMO positions at RIAs including Private Advisor Group and Hightower Advisors, as well as alts platform CAIS.
Peter Dugas is an Executive Director at Capco and leads Capco's Center of Regulatory Intelligence, focusing on delivering political and regulatory intelligence and optimizing regulatory change management programs for clients across the globe. With 25 years of experience helping clients solve their most pressing governmental challenges, Peter's career has primarily focused on providing advice on laws and regulations, regulatory affairs, and risk and compliance for financial services clients and Fortune 500 companies.
Before joining Capco, Peter worked as a lobbyist for the financial services industry and has served in senior executive positions in the U.S. Government, including the U.S. Department of the Treasury, CDFI Fund, U.S. Department of Labor, and U.S. Small Business Administration. He is frequently featured in publications such as Wall Street Journal, American Banker, The Hill, Bloomberg, Bloomberg Law, Politico, and Business Insider.
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.
