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.
Jerry Buckley was a founder of Buckley LLP, a leading national financial services law firm that combined with Orrick in 2023.
Alex Malley is chief executive of CPA Australia, an accounting body in Australia, with over 160,000 members.
Patti Newcomer is vice president of marketing and analytics at Intuit’s ProConnect Group, responsible for ProConnect Tax Online, Lacerte, and ProSeries. Her leadership and extensive experience in product development, marketing strategy, and brand strategy guides Intuit’s national efforts with tax professionals.
Prior to leading Intuit ProConnect Marketing, Patti was chief marketing officer and senior vice president at WorldPay US, Inc.; vice president of marketing for Intuit Financial Services; senior vice president and marketing director of Card Business at Wachovia; and vice president of brand marketing at Capital One. She also served as a section head at Procter & Gamble for more than 10 years. Patti holds an MBA from the University of Cincinnati and a bachelor of science degree in chemical engineering from Worcester Polytechnic Institute.
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.
