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.
Elina Tarkazikis is a reporter for National Mortgage News. She is a graduate of Ramapo College of New Jersey, where she was the founding editor in chief of the school's chapter of HerCampus.com and a staff writer for its student-run publication, The Ramapo News. She has previously worked for The County Seat in Hackensack and Elvis Duran and the Morning Show, iHeartMedia's nationally syndicated radio program. Elina is also a licensed real estate agent in New Jersey, adores pets and speaks three languages.
R. Peter Fontaine is founder and managing partner of NewGate Law, which provides legal and risk management services exclusively to the accounting industry. Prior to launching NewGate, he held senior in house legal positions at McGladrey and Arthur Andersen. Peter can be reached at (312) 626-2791 or pfontaine@newgatelaw.com
Dan Moisand is a planner and principal at Moisand Fitzgerald Tamayo in Orlando, Fla. Moisand is a former president of the Financial Planning Association.
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.
