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.
Barrett Burns is president and chief executive officer of VantageScore Solutions LLC, an independently managed joint venture of the three national credit reporting companies, Equifax, Experian and TransUnion, and the company behind the VantageScore consumer credit scoring model. He is a 2011 member of the Federal Reserve Board�s Consumer Advisory Council and a director of the Homeownership Preservation Foundation.
Sushil Prabhu is CEO of OpenCrowd.
As executive director of the Cloud Foundry Foundation, Abby Kearns leads the ecosystem of developers, users and applications running on Cloud Foundry, and works closely with the board to drive the Foundation’s vision and grow the open source project. Prior to Cloud Foundry Foundation, Abby focused on Pivotal Cloud Foundry as part of the product management team at Pivotal. She spent eight years at Verizon where she led product management and product marketing teams dedicated to the early days of cloud services. In her free time, Abby enjoys indulging in food and wine, and spending time with her husband and son.
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.
