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.
Josephine McCann is a senior marketing associate at AppZen.
Peter Margaritis, CPA, is the director of the School of Accounting Communication Center and an instructor of professional practice at Oklahoma State University, as well as an international speaker, humorist, and the author of “Improv Is No Joke: Using Improvisation to Create Positive Results in Leadership and in Life” and “Taking The Numb Out of Numbers: Explaining and Presenting Financial Information with Confidence and Clarity.” He has a Master’s Degree in Accountancy from Case Western Reserve University and is a licensed, non-practicing, CPA in Ohio. Margaritis has worked for companies such as Price Waterhouse, Victoria's Secret Catalogue, C&S National Bank, and Ohio Dominican University, and is one of the top thought leaders at the Business Learning Institute, the learning and innovation affiliate of the Maryland Association of CPAs. He is also a member of the AICPA, the Georgia Society of CPAs, the Maryland Association of CPAs, the Oklahoma Society of CPAs, and the National Speakers Association. He is also the past chairman of the Ohio Society of CPAs Executive Board and a former delegate to the AICPA Governing Council.
Mark Neeb is CEO of ACA International, the Association of Credit and Collection Professionals.
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.
