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.
Evan Daniels serves on the advisory board of Monitaur, an AI/ML governance software company committed to working with the insurance industry and regulators towards the responsible and effective integration of AI/ML. Formerly Director of the Arizona Department of Insurance and Financial Institutions and served as the 2022 Co-Vice Chair of the NAIC Committee on Innovation, Cybersecurity and Technology, which oversees the NAIC's Big Data and Artificial Intelligence workstreams, Evan also is Counsel at Mitchell Sandler LLC, a boutique financial services law firm, where he advises insurance companies, insurtechs, fintechs, and financial institutions on regulatory matters. For more information on Monitaur, please visit www.monitaur.ai, and follow the company on LinkedIn.
Louis Diamond is the CEO of Diamond Consultants, responsible for leading the long-term vision of the firm.
Previously, he worked as a consultant at Ernst & Young, and in wealth management at Morgan Stanley and UBS. He co-hosts the Diamond Podcast for Financial Advisors.
Connor Murdock, CPA, is senior crew with AuditClub, where he executes and reviews audit and assurance procedures to support CPA firms and companies throughout the U.S. He has over five years of external audit and transaction advisory experience at Deloitte and Elliott Davis.
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.
