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.
Gil Mermelstein is a managing director of West Monroe Partners and a member of the Executive Committee. He's responsible for developing and expanding the company's presence in New York and the U.S. East Coast, as well as advancing the company's alliance with BearingPoint Europe.
Douglas Meal is partner at Ropes & Gray, representing companies in complex transaction-related disputes arising from all varieties of business agreements. Most recently, he has played a leading role in the firm�s privacy and data security practice, specializing particularly in representing clients targeted by litigation and government investigations stemming from highly publicized data security breaches.As the lead outside lawyer handling claims stemming from the data security breaches suffered by Sony, Heartland Payment Systems, The TJX Companies, Nationwide, Hannaford Brothers, Aldo, Genesco, and Wyndham Hotels � some of the most highly publicized data security breaches in recent years � Meal has become the national leader in defending companies that suffer significant data security breaches involving consumer information against the ensuing claims and regulatory investigations.
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.
