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.
Colleen Johnston is the group head of direct channels, technology, marketing and corporate and public affairs for TD Bank Group.
Gregg Gelzinis is an associate director for Economic Policy at the Center for American Progress.
Jody Padar, CPA, also known as The Radical CPA, is a well-known advocate for tech adoption and general forward-thinking behavior inside the profession, and has been consistently named one of the Top 100 Most Influential to the Profession by Accounting Today. She is the author of "Radical Pricing," which was just published in May 2024, as well as two other books, "From Success to Significance: The Radical CPA Guide" and "The Radical CPA: New Rules for the Future-Ready Firm." She is a regular contributor to a number of industry publications, including Accounting Today and CPA Trendlines, where she offers practical tips and advice on running a next-generation firm. She previously owned her own small firm, and is urrently a senior tax advisor at april, Jody loves the idea of using AI and automation to transform taxes, and she's excited to help develop, evolve and share a simplified and pleasurable tax experience. Padar is married with two adult children and currently resides in Door County, Wisconsin. She earned her BBA from Saint Mary's College and MST from Northern Illinois University. Follow her on LinkedIn, X, Instagram and Facebook.
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.
