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.
Deborah J. Lucas is the Sloan distinguished professor of finance and director of the MIT Golub Center for Finance and Policy.
Espnola (Nola) Cartmill is Holmes Murphy's Chief Diversity Officer. As part of this role (as well as being part of Holmes Murphy's Legal Counsel), Nola leads Holmes Murphy's DE&I strategy, making strategic recommendations to the Executive Committee on DE&I initiatives, including recruiting, education, mentoring, and communications and community involvement. Nola also leads Holmes Murphy's internal DE&I committees, subcommittees, and employee resource groups.
Additionally, Nola consults on internal employee relations, leadership training, human resources, growth and development, and compliance-related projects.
Cartmill's background includes a prominent law career, rooted in a passion for DE&I, where she previously assisted employers in tackling both day-to-day employment law issues and litigation.
Louis Caditz-Peck is a member of the Consumer Financial Protection Bureau consumer advisory board and policy director at LendingClub.
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.
