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.
Yuval Teller-Hason is Director of Business Operations at Ledge, a finance operations platform that automates high-volume reconciliation with AI. Prior to joining Ledge in 2023, he worked for nine years in the Israel Ministry of Finance where he built economic strategy for the banking, capital management, and insurance sectors, led legislation efforts for open banking, and designed initiatives to develop the local payment market, including the creation of a new regulatory framework for payment service providers.
Matt Wood is the global head of finance and accounting outsourcing (FAO) at Personiv, responsible for delivering finance and accounting solutions to clients worldwide. He joined Personiv in 2016, bringing a wealth of experience from organizations including HireBetter, Dell and Princeton Recruiting Group, with a focus in recruiting and operations.
Erich Kron is Security Awareness Advocate for KnowBe4, the world-renowned cybersecurity platform that comprehensively addresses human risk management with over 70,000 customers and more than 60 million users. A 25-year veteran information security professional with experience in the medical, aerospace, manufacturing, and defense fields, he was a security manager for the U.S. Army's 2nd Regional Cyber Center-Western Hemisphere and holds CISSP, CISSP-ISSAP, SACP, and other certifications. Erich has worked with information security professionals around the world to provide tools, training, and educational opportunities to succeed in information security. Contact him through LinkedIn: https://www.linkedin.com/in/erichkron/.
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.
