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.
The Federal Reserve is monitoring the COVID-19 issue and its economic effects, according to a release from the central bank, attributed to Chairman Jerome Powell, released Friday.
Jessica Curtin joined the Compliance Risk organization of Paychex in October 2016 as a retirement, FSA and HSA compliance analyst. In this role, she is responsible for regulatory compliance of the Paychex retirement and Section 125 products, government and industry group relations, and business partner consulting. Jessica received her BS in finance from the Rochester Institute of Technology,and also holds the ASPPA designations of Qualified 401(k) Administrator (QKA), Certified Plan Fiduciary Advisor (CPFA), and Tax Exempt and Governmental Plan Consultant (TGPC).
With the world gripped in panic over the rapid spread of the coronavirus — and the stock market falling in response — payments companies have been left to speculate on what it all means to their operations in an increasingly global economy.
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.
