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.
Peter Rasmussen, MD, is Chief Clinical Officer, The Clinic by Cleveland Clinic, and Professor of Neurosurgery, Department of Neurosurgery, Cleveland Clinic and Cleveland Clinic Lerner College of Medicine, Case Western Reserve University. Dr. Rasmussen received his bachelor of science in biochemistry from the University of Wisconsin, Madison, in 1987. He earned his medical degree from the University of Wisconsin Medical School in 1991. Dr. Rasmussen is a past-President of the Society of Neurointerventional Surgery where he played a leading role on the national stage in continuing society initiatives to resource, train and support veteran and new practitioners in an area of medicine that is transforming treatment approaches to neurovascular conditions.
Christoph Dankert is the senior vice president of Provider Partnerships at Carrum Health.
Scott Madenburg is a market advisor at AuditBoard, where he works with various internal audit and compliance teams to help automate the administrative tasks of audit, risk and compliance activities. He is an internal audit leader with over 15 years of global business experience in financial, information system, operational, and compliance auditing; Sarbanes-Oxley; business process evaluation and design; ERP system implementation and administration; mergers and acquisitions; cyber-security; and fraud investigation. He began his career at Arthur Andersen before transitioning into internal audit with Fox Entertainment & News Corporation and Gemstar-TV Guide/Rovi Corporation. Prior to joining AuditBoard, he was the head of audit at Mobilitie LLC, where he built the internal audit function from the ground up to an eight-person department focusing on agile audits, cyber and IT security, and FCC compliance.
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.
