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.
Michael Sonnenblick, J.D., LL.M., currently serves as an editor/author for Thomson Reuters Tax Products group. He holds a J.D. degree from Boston University School of Law and an LL.M. in Taxation from New York University Law School. A member of the New York Bar, he has 20 years of tax experience, including service with a major Wall Street bank and international law firms.
Alan Conway is the practice group lead for client delivery at Intapp. He helps firms drive profitability and maximize realization.
Robert Mazur is the New York Times best-selling author of "The Infiltrator," a memoir about his undercover life, much of which was spent acting as a conduit between ruthless drug barons and corrupt legitimate appearing senior executives that cleaned billions in blood- stained money through otherwise respectable international banks and businesses. For years, in the eyes of organized crime leaders he was a highly successful, mob-connected money launderer who helped manage their illicit fortunes. His clients, some of the most famous and deadly drug cartel bosses, issued a $500,000 contract on his life when arrests were made around the world and he was revealed to be a highly trained U.S. federal undercover agent. After completing a highly decorated 27-year career as a federal agent in three U.S. agencies, Mazur is now the president of KYC Solutions Inc., a firm that provides speaking, expert witness and consulting services to companies worldwide. More information about Mazur, his book and the film based on his life can be found at https://www.robertmazur.com/. The views expressed are his own.
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.
