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.
Rani Hoitash is the John E. Rhodes Professor of Accountancy at Bentley University. He received his Ph.D. in accounting and information systems from Rutgers University and a Bachelor of Science in Economics at the College of Management in Tel-Aviv Israel. His research concentrates on corporate governance, internal controls and auditing. His work is published in The Accounting Review, Journal of Accounting Research, Journal of Accounting & Economics, Journal of Financial Economics, Contemporary Accounting Research, Auditing: A Journal of Practice and Theory, Sloan Management Review, and several other journals. Professor Hoitash’s teaching interests include financial accounting, accounting information systems, and auditing. Hoitash recently served as an editor of Auditing: A Journal of Practice and Theory and on the editorial boards of Contemporary Accounting Research and the Journal of Business Research. He is a member of the Information Systems Audit and Controls Association and the American Accounting Association and is a Certified Information System Auditor (CISA).
Landi Morris is a Ph.D. student at Bentley University. Her research interests include audit quality, fees and resources. Prior to pursuing an academic career, Landi served as a tax manager in the Boston office of Grant Thornton LLP. She is a CPA licensed in the state of Massachusetts.
Kelly White is chief executive officer at RiskRecon.
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.
