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.
Jonathan is the CEO of Diyotta, a technology company that provides software for orchestrating and automating the movement and integration of Big Data on Hadoop, MPP and NoSQL platforms. He has over thirty years of experience with Business Intelligence, Data Warehousing, Data Integration and Information Management solutions. He has held various executive leadership positions with several leading Business Intelligence companies beginning with BASE Consulting Group (BASE), which he co-founded in 1994. In 2003, BASE merged with Knightsbridge Solutions and Jonathan became a member of the executive management team and board member. In 2006, Knightsbridge Solutions was acquired by Hewlett-Packard to become their Information Management Practice. Jonathan has been a columnist for Information Management magazine, a faculty member of The Data Warehousing Institute and a lecturer at the University of California, Berkeley Extension and Santa Clara University. He can be reached at jwu@diyotta.com.
Alyssa Titche is an associate with Foley & Lardner LLP. She is a member of the Business Litigation & Dispute Resolution Practice.
Aizawa is a special counsel and business lawyer at Foley & Lardner LLP where she focuses her practice on employee benefits, including health and welfare plans, pension plans and executive deferred compensation 457 plans for tax exempt and governmental employers.
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.
