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.
Ed Boyle is the CEO of Medici Bank. A payments and digital banking expert, Boyle has more than 15 years' experience in varied product and marketing roles at American Express. After serving as U.S. managing director of Fidor Bank in Germany, Boyle brings a deep customer orientation and knowledge of banking technology, and partnership development to create more open and efficient solutions.
Robin I. Frank is a partner with Shapiro, Blasi, Wasserman & Hermann PA, a litigation and transactional law firm in South Florida. She focuses on labor and employment law and has extensive experience both prosecuting and defending against nationwide “collective action” claims for unpaid overtime or minimum wages under the Fair Labor Standards Act. Reach her at (561) 477-7800 or rfrank@sbwh.law.
Eden Amirav is CEO and co-founder of Become.
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.
