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.
Vikrant Rai is the managing director of the risk advisory practice at Grant Thornton Advisors LLC.
As chief financial officer at Certinia, Erin Sawyer brings over 20 years of financial and operational experience with 10 years in the software industry. Most recently, she was the CFO of Wowza and deputy CFO at Vertafore. She specializes as an executive strategist focusing on financial and operational discipline through business partnership, value creation and operational excellence. She graduated from North Carolina State University with her MBA and Arizona State University with a degree in accountancy.
Keely Wilkins is the Global Program Manager for Insurance Partnerships, and an Evangelist with the Office of the CTO at Check Point Software Technologies. She has nearly 30 years of experience in technology and cybersecurity. Keely is active in global initiatives like the World Economic Forum's Partnership Against Cybercrime and frequently speaks on AI, cyber insurance, and cyber risk management. She holds a MS in Cybersecurity and an MLS in Cybersecurity Law and Policy.
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.
