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.
Lindsay Rosenfeld is an audit and assurance partner at Deloitte & Touche LLP. As the national market offering leader for governance, risk, and controls within Deloitte's accounting & reporting advisory practice, she specializes in SOX readiness and the modernization of SOX and internal control programs. She also assists companies in implementing technology solutions to manage these programs effectively.
Andrew Zea is a Capco consultant based in Chicago IL, with three years of technology experience in software implementation and product management. Andrew's focus is creating efficiencies by streamlining processes, developing innovative technologies, and mapping new ways to use data to drive results. He has experience leading global agile teams and truly enjoys delivering outcomes across a wide variety of domains and functions. He remains continuously passionate about leading edge trends across technology, data, and customer experience.
Gustavo Oliveira is a Capco Solution Architect passionate about modernizing the financial sector. With 15 years of experience in banking and insurance, he specializes in leveraging new technologies to drive digital transformation. He is a subject matter expert in digital development, identifying leading industry trends across new customer-facing technologies, channel strategy, and UI/UX, all with the central mission to help clients across financial services turn good ideas into great results.
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.
