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.
Esther Schlorholtz is senior vice president and director of community investment at Boston Private Bank.
L. Gary Boomer, CPA, CITP, CGMA, is the visionary and strategist at Boomer Consulting Inc., in Manhattan, Kansas.
David has been in the accounting industry for many years and has been a practicing accountant since 1966. While at the IRS he held various positions: agent, trainer, speaker and technical chief. He received his CPA and a Master's in Taxation from Long Island University's CW Post College. He was an accounting professor at Suffolk County Community College in New York for over 15 years. He is well-known as a speaker and thought-leader in the field of utilizing new technology to improve the efficiency of operations in tax, accounting, practice management and workflow management.In 2011, he was the recipient of the 'On the Edge' Innovation Award from the Leading Edge Alliance, which recognizes industry leaders for their vision and significant contributions to the accounting profession.In 2012, he received the Brand Ambassador Award from Enterprise Worldwide.
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.
