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.
Roch Monnig, CFP, is a wealth advisor at Burney Wealth Management, one of the first registered investment advisor firms in Virginia, which encompasses a range of services including financial planning, investment management, tax planning, estate planning and retirement planning.
Monnig earned his bachelor's degree from the University of Tennessee, Knoxville in 2016 and became a certified financial planner in 2018.
Arun Balakrishnan is CEO of Xceedance, a global leader in delivering insurance-focused consulting, technology, operations, and data solutions to many of the world's largest P&C insurance organizations. He has more than 15 years of experience launching and leading start-ups in the insurance sector. He is passionate about promoting innovation and transformation in the insurance industry, which he believes to be a key element of societies and economies.
Michael Turner is CEO of Validis. Validis connects auditors with accounting data. Michael has worked in the data industry for the last 5 years and previously was a Partner at Oliver Wyman.
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.
