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.
Colleen Blake is SVP of people at GuideSpark. Colleen leads culture change at the intersection of HR and marketing, with a passion for developing solutions that cultivates an enhanced employee experience and boosts organizational productivity. She has been the recipient of the Silicon Valley Women of Influence Award Winner and the Journal’s Top 40 Under 40 Award. Colleen is also an advocate and mentor for girls and women in technology, speaking on panels to amplify their voices in STEM. Before joining GuideSpark, Colleen held leadership positions as the VP of Marketing at ServiceRocket and Senior Director of Global People Operations at Brocade Communications.
Eric Dynowski is the chief technology officer at ServerCentral Turing Group (SCTG), which offers cloud-native software development, AWS consulting, cloud infrastructure and global data center services.
Matthew Miller is a partner at law firm Foley Hoag LLP. His practice focuses on complex business and commercial litigation with an emphasis on securities litigation, auditor liability matters and business crimes and government investigations.
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.
