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.
Alexandre "Alex" Lin is the co-founder and CEO of SumIt, accounting software for family offices. He also served as a second-generation leader of his family's real estate ventures and collaborated with more than 30 family office advisors to build SumIt for the unique needs of the family office sector. He holds an MBA from Chicago Booth and a master's from the London Business School.
Ethan Chiu is a visiting fellow at the Institute for AI Policy and Strategy, a nonprofit research organization, specializing in U.S.-China technology competition. He is pursuing an M.P.P. at the Yale Jackson School of Global Affairs.
Matthias Steinberg is COO and CFO at MindBridge. He was previously CFO of IONOS, Europe's largest mass market web hoster. He also served on the board of several group companies and has more than 15 years' experience in investing in and managing high-growth tech businesses.
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.
