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.
Juan Correa is an associate vice president at BCA Research's Global Asset Allocation service.
He has been a guest lecturer at McGill and Concordia University, and he holds a BCom in Finance and Economics from McGill University, as well as the CFA designation.
Jill Cetina is an executive professor of finance at Texas A&M University. She is a former associate managing director of U.S. bank ratings at Moody's, and the former vice president of supervision at the Federal Reserve Bank of Dallas.
Kathleen Biggins is the founder and president of C-Change Conversations, a nonprofit organization dedicated to promoting productive, non-partisan discussions about the science and effects of climate change. The organization, comprised of volunteers who span the political spectrum, sponsors the C-Change Conversations Primer, which invites business and community leaders to learn about climate change from a wide range of nationally-recognized scientists and business and military leaders. Kathleen also developed the C-Change Primer with input from Climate Central and the Yale Program on Climate Change Communication. Team members have presented the Primer to over 20,000 people in 32 states, and it is widely hailed as an intelligent, dispassionate introduction to and illumination of climate change. The Primer has been endorsed by business, political and social leaders and enthusiastically received by many conservative audiences across the country. Learn more at www.c-changeconversations.org
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.
