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.
Sister Nora Nash is the director of Corporate Responsibility for the Sisters of St. Francis of Philadelphia and a member of the Interfaith Center on Corporate Responsibility, a shareholder coalition engaging the top U.S. banks on risk management and responsible lending.
Jewels Lett is a registered dietitian and health coach at Marathon Health, a provider of onsite health centers that enable employers to optimize the health of their workforce and business.
Jonathan Roberts is a member of Meister Seelig & Fein's commercial litigation group and represents clients in a variety of governmental investigations and regulatory matters as well as litigation. Jonathan has 20 years of experience in enforcement and investigations at the SEC and Ernst and Young. Prior to joining MSF, Jonathan was senior global legal counsel at EY and successfully represented EY and its professionals in SEC, Department of Justice, FINRA, Public Company Accounting Oversight Board, Department of Labor, and state regulatory inquiries concerning multiple industries including retail, manufacturing, pharmaceutical and financial services.
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.
