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.
Brice Luetkemeyer is president and CEO the Bank of St. Elizabeth in Missouri, where he has served in various leadership roles for the past three decades. During his 41 years in banking, Luetkemeyer was also a bank examiner with the Missouri Division of Finance from 1978 to 1988.
Samuel Dibble is a partner at Baker Botts.
Gabrielle M. Luoma, CPA, CGMA, founder and visionary of MOD Ventures, began building her business in 2004 in the living room of her own home. The MOD Ventures firm is unique in that it was built upon the aspiration to not only help businesses grow, but to change the way they see accounting, taxes, day-to-day business operations, and their big-picture vision. Luoma is currently working on her third book, this time for CPAs who are also passionate about innovation. When Luoma isn’t innovating, she can be found rooting on her youngest daughter in her cheer competitions, dreaming, drinking coffee, or watching Game of Thrones. Luoma graduated from New Mexico State University with a bachelor of accountancy and is an advisor for the accounting department at Pima Community College and an executive committee member of the PCPS section of the AICPA.
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.
