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.
Leah Machado is the senior director of HR services at Paychex, a provider of integrated human capital management solutions for payroll, human resources, retirement and insurance services. She leads an organization with over 500 HR practitioners who provide HR outsourcing services to over 36,000 Paychex HR Services clients and serves 1 million worksite employees. Leah’s career spans over 24 years in the retail, restaurant, and HCM outsourcing industries, and includes HR practitioner and leadership experience.
Arijit Sengupta is CEO of BeyondCore, a Salesforce company.
Steven Martin is Vice President, Strategy at Sageworks, a financial information company that provides life-of-loan portfolio and risk management solutions to financial institutions. Before joining Sageworks, Steven led corporate strategy for the tech and life sciences bank, Square 1 Bank, and led strategy and integration for U.S. retail banking operations of Royal Bank of Canada. Steven came to banking after a career of management consulting, where he specialized in risk management and large scale projects with large banks in North America, Asia and Australia. Steven earned an MBA from Stanford and a bachelor’s degree in economics from Saint Olaf College.
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.
