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.
Poul Nielsen, Director of Strategy with Nexthink, has more than 20 years of executive management experience, including a strong background in routes-to-market strategy for hyper-growth with some of the world-s leading technology companies.
Danielle Lee, editor-in-chief of Employee Benefit News, was most recently managing editor of Accounting Today, and previously served as technology editor of Accounting Today and editor-in-chief of AccountingTechnology.com. Prior to that, she held the role of senior editor.
Before joining Arizent, she covered the emerging corporate responsibility movement for CRO (Corporate Responsibility Officer, now CR) magazine as executive editor and worked for a range of entertainment and lifestyle publications in Los Angeles, including industry trade magazine TelevisionWeek. She holds a bachelor's degree in print journalism and a minor in cinema/television from the University of Southern California.
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.
