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.
Nikita Mistry is an associate at the law firm BakerHostetler. She is a member of the team serving as counsel to the court-appointed trustee under the Securities Investor Protection Act for the liquidation of Bernard L. Madoff Investment Securities LLC.
Jimmy Fokas is a partner at BakerHostetler. He is an experienced white collar and securities enforcement defense attorney with a broad practice representing public and private companies, regulated entities, audit committees and their officers, directors and employees before the Securities and Exchange Commission, the Department of Justice, the Financial Industry Regulatory Authority and the New York Office of the Attorney General. He also conducts internal investigations regarding potential FCPA violations and represents court-appointed fiduciaries in the recovery of assets. Prior to joining the firm, he served as senior counsel in the Division of Enforcement in the New York regional office of the SEC, where he conducted investigations and commenced actions concerning accounting and financial reporting fraud, insider trading, offering fraud and various other securities law violations. He currently serves as a co-leader of the Financial Investigations, Restatement and Accounting practice team.
John Hoben is an ambassador at QR1.
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.
