IRS Explains Extended Payroll Tax Due Dates

Employers who elected to defer eligible employees’ payroll taxes, now have IRS issued guidance (Notice 2021-11) on how to withhold and pay the deferred taxes throughout 2021 instead of just the first four months of the year.

Notice 2020-65 gave employers the option to defer eligible employees’ Social Security tax from Sept. 1, 2020, to Dec. 31, 2020. This applies to employees paid less than $4,000 every two weeks (or an equivalent amount for other pay periods) with each pay period considered separately. The employee portion of Social Security tax (Old Age, Survivors, and Disability Insurance, or OASDI) is calculated at 6.2% of employees’ wages (IRS News Release IR-2021-17).

Under the Consolidated Appropriations Act, 2021, P.L. 116-260, 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. As a result, any associated interest, penalties, or additions to tax for late payment of any unpaid applicable taxes will begin to accrue on Jan. 1, 2022, rather than on May 1, 2021.

Any taxes deferred under Notice 2020-65 are to be withheld and paid ratably from employee wages from Jan. 1, 2021, through April 30, 2021. However, the Consolidated Appropriations Act, 2021, signed into law on Dec. 27, extends the period that deferred taxes are withheld. The period covers the entire year — from Jan. 1, 2021 through Dec. 31, 2021.

Notice 2021-11 amends Notice 2020-65 to reflect this extended period. Payments made by Jan. 3, 2022, will be considered timely because Dec. 31, 2021 is a legal holiday. For any unpaid balances, penalties, interest, and additions to tax start on Jan. 1, 2022.

The IRS warned employees that they could see their deferred taxes being collected immediately and should check with their employer’s payroll contact to review their collection schedule.

At Brink Tax, we help taxpayers stay updated with COVID-related changes. Contact Brink Tax today with any questions.