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.
Jeremy Ung is chief technology officer at BlackLine. He has over 20 years of experience in software engineering, spanning development, product management and engineering management. He most recently served as CTO at AI-powered technology financial management software leader Apptio, leading the engineering, operations and global support teams. Before joining Apptio in 2019, he spent three years in leadership positions at Amazon Web Services. Before that, he held various senior program and software management roles at Microsoft and MDA, a satellite and geo-intelligence pioneer.
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Rajiv Matta is the Chief Innovation Officer at Lilypad Insurance. Matta has more than 20 years of experience in specialty insurance across carriers, reinsurers and managing general agencies, and he most recently served as chief innovation officer at Millennial Specialty Insurance, a technology-focused MGA within The Baldwin Group, where he worked on product launches and program development. Before that, he led the international property and specialty business at Assurant, overseeing seven product lines across 12 countries for the Fortune 300 insurer.
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.
