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.
Bryan Cannon, CFP, is CEO and chief portfolio strategist at Cannon Advisors. A seasoned stock market technical analyst with over 25 years of investment and financial planning experience, he serves as the host of Markets ‘N5, a biweekly video series focused on analyzing market trends based on technical analysis. Cannon’s career covers a diverse range of investment and securities experience, ranging from financial and estate planning for high- and ultra-high-net-worth families, as well as senior and partner roles with both the big Wall Street firms and smaller boutique firms.
Kristina Wallender is chief experience officer at Human Interest, a leading 401(k) account provider for small to medium-sized businesses. Her mission is to create a more empowered world by helping others take control of their financial future. Previously she has served as the head of marketing for RealtyShares, a real estate investment platform with $870 million invested, and Ticketfly, a live events platform serving more than 1,800 venues. Kristina received her MBA from the Stanford Graduate School of Business.
Ashish Masih is Encore Capital Group’s President and CEO.
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.
