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.
David Drake is vice president and benefits consultant at BXS Insurance. He can be reached via email at david.drake@bxsi.com.
Max Effing is part of the global insurance practice at Simon-Kucher & Partners. He focuses on price/product design, salesforce effectiveness and digital sales processes. Within the scope of his projects he works primarily on the optimization of insurance portfolios, and modeling of innovative sales processes with a strong emphasis on value delivery, customer engagement, behavioral pricing and needs-based selling. Max pursued his studies in International Business at Maastricht University, the Netherlands. He holds a master degree in finance and marketing.
Roland Cloutier is senior vice president and chief security officer at ADP. He is responsible for cyber, information protection, risk, workforce protection, crisis management, and investigative security operations for ADP. With over 25 years of experience in the military, law enforcement, and commercial sector, he is an expert in corporate and enterprise security, cyber-defense programs, and business operations protection. Prior to ADP, he served as CSO of EMC, was a U.S. Air Force combat security specialist, and an aerospace protection and anti-terrorism Specialist for the Department of Defense. Roland has been honored with numerous industry recognitions, most recently the 2018 ISE Luminary Leadership Award. He is also the author of, “Becoming a Global Chief Security Executive Officer” where he shares his expertise on how to effectively plan for the future demands of leadership in global security.
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.
