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.
Mark Piszko, CPA, is a partner at PKF O'Connor Davies. He has nearly 40 years of experience in providing auditing and consulting services to a wide variety of not-for-profit entities, including charitable organizations, religious entities, educational and cultural institutions and social services agencies that receive government funding. He is the partner-in-charge of the firm's not-for-profit practice area and is the firm's quality assurance partner for single audits.
Joe Crawford is Director of Professional Services at Glassbox, where he helps banks and financial institutions unlock insights from customer engagement data. He brings over 20 years of experience in enterprise monitoring, digital analytics, and performance engineering from leadership roles at Citi, Morgan Stanley, and AT&T. Joe specializes in applying behavioral data and AI to improve digital experiences and reduce operational risk.
Chintan Shah leads Bloomberg's product strategy for buyside Treasury, Asset-Liability Management (ALM), and Finance solutions, with a focus on Insurance General Accounts, Pension Funds, and institutional cash management. With over 16 years of capital markets and investment management experience, Chintan brings deep expertise in serving the needs of asset owners and asset managers.
He has spent the past eight years at Bloomberg, driving product innovation and client engagement in the ALM and Investment risk space. Prior to Bloomberg, he was part of the Overlays and ALM team at AIG Investments, where he worked on optimizing balance sheet and liability-driven investment strategies. Chintan began his career in interest rate derivatives trading and risk management, holding roles at Barclays and Deutsche Bank.
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.
