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.
Kevin Wack is the Banking Editor at American Banker, leading the publication's coverage of large, regional and community banks. He also writes regularly about business, regulatory and legal issues that affect the banking industry.
Kevin, who's based in Southern California, has more than 14 years of experience at American Banker. He previously served as the publication's consumer finance reporter and, earlier, while based in Washington, D.C., as its Capitol Hill correspondent.
His investigative journalism has been honored numerous times by both the Society of American Business Editors and Writers and the American Society of Business Publication Editors. In 2020 he won the Jesse H. Neal Award for the best range of work by a single author.
Kevin's career in financial journalism grew out of two jobs he had in Washington, D.C., during and immediately after the global financial crisis. In 2009, as a fellow in the American Political Science Association's Congressional Fellowship Program, he worked for a Senate subcommittee that was investigating the causes of the crisis. He later worked on the staff of the Congressional Oversight Panel, which was charged with overseeing the use of bailout funds.
Allissa Kline is a Buffalo, New York-based reporter who writes about national and regional banks and commercial and retail banking trends. She joined American Banker in 2020 and previously worked for more than a decade at Buffalo Business First, where she covered banking and finance, insurance and accounting. Kline started her journalism career at the Observer-Dispatch in Utica, New York. She graduated from Colgate University and the S.I. Newhouse School of Public Communications at Syracuse University.
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.
