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.
Dave Werry is the co-founder, president and COO of Well. With a background spanning two decades of experience in different verticals of the healthcare industry, including at Aetna as VP, Head of Consumer Health Products and Transformation and Global Head of Biotech at PPD, Dave believes every individual deserves access to a trusted health partner. Dave received his B.A. from University of North Carolina at Chapel Hill in Economics and Political Science before graduating with an MBA from Harvard Business School.
Joseph R. Mason is a fellow at the University of Pennsylvania's Wharton School and an academic affiliate at the BVA Group. Dr. Mason was previously a professor of finance and the Hermann Moyse, Jr./Louisiana Bankers Association chair of banking at Louisiana State University, a senior financial economist at the Office of the Comptroller of the Currency, and a visiting scholar at the Federal Reserve Bank of Philadelphia and the Federal Deposit Insurance Corp. He holds a doctorate in economics from the University of Illinois at Urbana-Champaign.
Billy Angelo is the managing partner of Angelo & Associates, a CPA firm focused on businesses in the professional services sector. He has been in the accounting industry since his graduation from the University of Delaware, and currently lives in New Providence, New Jersey with his wife and four children.
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.
