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.
Thomas M. Long, is managing editor for the Federal Tax News Group, with Thomson Reuters Checkpoint within the Thomson Reuters Tax & Accounting business. Tom is a member of the New Jersey and New York bars, with over 30 years in tax publishing. He is a federal tax generalist who is primarily responsible for writing daily tax news articles for Federal Taxes Weekly Alert. He holds a B.A. in English literature from Rutgers University, a J.D. from New York Law School, and an LL.M. in Taxation from New York University.
Catherine Murray, J.D., LL.M. is a senior tax analyst with Thomson Reuters Checkpoint within the Thomson Reuters Tax & Accounting business. Catherine is a federal tax generalist who focuses primarily on writing current awareness tax news articles for Federal Taxes Weekly Alert and also serves as the Project Editor for the Federal Tax Handbook. Catherine completed her B.M. at DePaul University, her J.D. at the Benjamin N. Cardozo School of Law, and her LL.M. in Taxation at New York Law School.
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.
