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.
Sathish Kumar Manimuthu serves as the CTO at NeuralMetrics, an insurtech offering AI-powered risk-assessment intelligence for P&C carriers, brokers, and agents. With experience in launching innovative technology and products for startups and Fortune 500 companies, Sathish is responsible for the company's suite of data-delivery engines and AI models.
Ronen Assia is a Managing Partner at Team8.
Heather Sullivan is the North American Strategy lead for Accenture's Insurance practice, where she spends her time driving new business endeavors on behalf of carriers, brokers, MGAs, private equity organizations and start-ups. She helps organizations understand agency needs, wants, desires, motivators and, ultimately, how to achieve market success. Heather holds a bachelor's degree from University of Southern California. Heather serves several global roles within Accenture, including as the executive sponsor for Accenture's Insurance Strategy diversity and inclusion efforts. Heather resides in Chicago with her husband, daughter and son, and very lively Portuguese Water Dog.
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.
