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.
Trish Coughlin is corporate controller at Workday, which provides financial management and human capital management software. She is responsible for all aspects of accounting and external reporting.
Trish has more than 25 years of experience in corporate finance and accounting. Prior to Workday, Trish was a managing director at Goldman Sachs where she spent more than 10 years in finance and operational leadership roles. Trish previously held roles at Honeywell where she was controller of a $4 billion business, and PricewaterhouseCoopers (PwC) where she provided services to multinational clients in the audit and transaction advisory practices. Trish is also an active volunteer in her community and is currently on the board of directors at the Community Foundation of Utah.
Trish holds bachelor’s degrees in international relations and accounting from Lehigh University.
Joseph Cioffi is chair of the insolvency, creditors' rights and financial products practice group at the New York-based law firm Davis & Gilbert LLP.
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.
