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.
Liz Kolar, MBA, CPA, CGMA, is executive vice president for Surgent Accounting & Financial Education. She brings over 35 years of accounting industry and professional education experience to her role at Surgent where she drives and oversees the ongoing expansion of accounting and financial services exam prep and continuing education offerings. Prior to Surgent, Kolar founded and led Pinnacle CPA Review, which was later acquired by Surgent. She began her career in public accounting with Coopers & Lybrand, where she audited financial services clients. She has served as a professor, teaching graduate and undergraduate accounting courses. She earned her MBA in public accounting from Pace University. She is a member of the PICPA and the AICPA.
Mary Anne Ehlert, CFP, specializes in financial planning for families with a disabled family member. She is the founder of Protected Tomorrows in Lincolnshire, Illinois, and is a partner in Forum Financial. For information about joining Protected Tomorrows as an advisor, contact her at (847) 522-8086.
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.
