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.
René Lacerte is the CEO and founder of Bill.com. Prior to launching Bill.com in 2006, he co-founded online payroll service provider PayCycle in 1999, which was acquired by Intuit in 2009. Lacerte also spent five years at Intuit, creating and managing the company's bill presentment team and growing its bill payment and credit card offerings into multi-million dollar businesses for the company. He also launched Intuit's first connected payroll product, growing the team from two employees to 300 in 18 months.
Michael Parrinello is a partner and practice leader of Bonadio Advisory at The Bonadio Group. As the leader of the firm’s Bonadio Advisory Practice, which offers strategic consulting services from analysis to execution, driving profitability, increasing efficiencies, mitigating risk and improving operations, he works closely with clients to evaluate opportunities and achieve their strategic goals by delivering value-added solutions.
Brad Bolton is president and CEO of Community Spirit Bank in Red Bay, Alabama, and chairman of the Independent Community Bankers of America.
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.
