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.
Doug Simons is a former investment banker who worked at Morgan Stanley, Credit Suisse and UBS as an advisor to U.S. banks and other financial institutions. Most recently, he served as a senior markets and policy fellow at the Consumer Financial Protection Bureau, where he advised the director and his team on issues related to the banking industry. In this role, he also represented the CFPB on FSOC's Systemic Risk Committee.
Elizabeth (Liz) Reimer serves as the chief human resources officer at Premise Health, where she leads the company's overall human resources strategy. She manages major initiatives across talent recruitment, leadership development, HR technologies, data analytics, employee engagement, employee relations, HR business partnerships, and comprehensive rewards packages—including pay, benefits, and wellness programs.
Reza Rooholamini serves as chief science and AI officer at CCC Intelligent Solutions, where he brings deep expertise in artificial intelligence, cloud computing and emerging technologies.
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.
