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.
Anastasia Su is a marketing specialist at Synder. As a content creator and Synder expert, she focuses on integrations between accounting software such as QuickBooks and Xero, and various payment platforms and online marketplaces, including Stripe, Shopify, and Amazon.
Kathleen Greer is the founder of KGA, Inc., a leading provider of Employee Assistance and Work Life Programs. Kathy's career has been dedicated to reducing the stigma of mental health by delivering innovative wellbeing programs that address the challenges faced by employees and managers. As a senior advisor to the National Behavioral Consortium, Kathy continues to champion the work of top-tier EAPs across the country.
Stephen T. Romano is the founder of Romano Strategic Communication and has more than 25 years' experience developing branding, messaging, and marketing communications programs for American Express, Honeywell, Keurig, MIT, Texas Medical Center, KGA, Cleveland Clinic, Hewlett-Packard, the Smithsonian, and other leaders. His articles have appeared in Newsday, The Boston Herald, People Magazine, EBN, and various trade and industry publications.
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.
