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.
William Holder serves as dean of the USC Leventhal School of Accounting, and holds the Alan Casden Dean’s Chair of Accountancy. Prior to his current post, he was the Ernst & Young Professor of Accounting and director of the SEC and Financial Reporting Institute in the Marshall School of Business at the University of Southern California. Dean Holder has published extensively on the subjects of financial accounting and reporting and auditing. He has received numerous awards during his career, including being twice named as one of the “Top 100 People” in the accounting profession and receiving the AICPA Gold Medal for Distinguished Service, the highest honor awarded by that organization. He has served on a number of governance and standard setting authorities including the Accounting Standards Executive Committee of the AICPA and the Governmental Accounting Standards Board. During congressional hearings leading to passage of the Sarbanes/Oxley Act, he provided invited testimony about financial reporting, auditing and corporate governance.
Udi Hoitash is an accounting professor at Northeastern University in Boston.
Jen Farrell is director of agent and customer research at Liberty Mutual and Safeco Insurance, supporting independent agent distribution and product development. In her role, she conducts primary research and interprets industry trends to ensure Liberty Mutual and Safeco take a data-driven approach to the agent and customer experience. Jen brings nearly 15 years of experience in research and digital analytics, previously working with some of the world’s largest brands to uncover marketing insights and answer critical business questions. When she’s not studying consumers, independent agents, or the insurance industry, she can be found hiking through the woods in New England.
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.
