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.
Nick Nesbitt is managing director at Tagetik UK.
Catherine Leffert covers all things banking, including credit scandals, mergers and acquisitions, compliance blunders and the wonkiest accounting rules you've never heard of. She joined American Banker in 2022, and is based in Washington, D.C.
Obsessed with understanding why banks do what they do, Catherine has investigated the nuances of commercial real estate risk, and covered the mechanics of synthetic risk transfers and private credit. Her coverage of TD Bank's novel money-laundering failures dug into a never-before-used regulatory process to revoke banks' charters — an oddity that Sen. Elizabeth Warren flagged to the Justice Department weeks later.
Previously, Catherine covered banking and private equity in Dallas, where she was born and raised, at a time when the region was one of the fastest-growing economies in the country.
Catherine graduated from Syracuse University, and was managing editor of the city's independent, student-run newspaper, The Daily Orange. Her reporting has been honored by the American Society of Business Publication Editors and the Society of Professional Journalists. She's also been chosen for fellowships by the Wharton School of the University of Pennsylvania and the Society for Advancing Business Editing and Writing.
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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.
