A recently released notice allows employers who elected to defer certain employees’ taxes to withhold and pay those deferred taxes throughout 2021—instead of just the first four months of the year.
The action comes in Notice 2021-11 which has been released by the Internal Revenue Service.
It started with a presidential memorandum signed on Aug. 8, 2020 that led to Notice 2020-65 being issued on Aug. 28, giving employers the option to defer certain employees’ Social Security taxes from Sept. 1, 2020, to Dec. 31, 2020.
The deferment applies to employees who are paid less than $4,000 every two weeks—or an equivalent amount for other pay periods—with each pay period considered separately.
These taxes are technically called Old Age, Survivors and Disability Insurance or OASDI, and are calculated at 6.2% of employees’ wages.
Same taxes, more time
Originally, any taxes deferred under Notice 2020-65 are withheld and paid ratably from employee wages between Jan. 1, 2021 and April 30, 2021.
However, Notice 2021-11 expands that payment period: “...this notice modifies Notice 2020-65, 2020-38 I.R.B. 567 (Sept. 14, 2020), by extending the time period during which employers must withhold and pay Applicable Taxes (as defined in Notice 2020-65 and described herein). Specifically, this notice provides that the end date of the period during which employers must withhold and pay Applicable Taxes is postponed from April 30, 2021, to Dec. 31, 2021, and associated interest, penalties, and additions to tax for late payment with respect to any unpaid Applicable Taxes will begin to accrue on Jan. 1, 2022, rather than on May 1, 2021,” Notice-2021-11 states.
Payments made by Jan. 3, 2022, will be considered timely, since Dec. 31, 2021, is a legal holiday. Penalties, interest and additions will now start to apply on Jan. 1, 2022 for any unpaid balances.
Employees could see their deferred taxes being collected immediately. The IRS recommends they check with their company’s payroll contact on what their collection schedule will be.
For more information on this and other tax relief relative to the COVID-19 pandemic, check out the IRS website at IRS.gov.