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.
Shanna Laughton, CPA, CA, is the manager of global tax and payroll at Halogen Software. She has over 15 years of experience in public accounting, and providing tax and payroll solutions to organization across various industries. At Halogen, Shanna’s team is responsible for local and international payroll and tax functions.
Meredith J. Deen began her career with FMSI in 1990. Currently, as COO, Meredith spearheads FMSI’s day-to-day operations with particular focus on Client Relations and Software Development. She remains focused on upholding FMSI’s commitment to ethics and high-level service with every client, prospect and partner interaction. As FMSI continues to grow, Ms. Deen works to ensure a course of continuous improvement in order to maintain our solid client partnerships. Ms. Deen previously worked for a large Southeastern financial institution and uses that experience to appreciate the day-to-day concerns of clients and prospects. Ms. Deen holds a Bachelor of Arts in Mathematics and Economics from Agnes Scott College and an Executive MBA from Georgia State University.
Teresa Freeborn is chairwoman of CUNA's Awareness Advisory Group and president/CEO of Xceed Financial CU, El Segundo, Calif.
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.
