​Understanding Deferring Employee Payroll Taxes

​Understanding Deferring Employee Payroll Taxes

01/21/2021 Tags: Announcements, In the News, COVID-19

The following was initially prepared before the IRS issued its latest guidance about payroll tax deductions. We've update it on Jan. 21, 2021, to reflect the new guidance. Any subsequently issued guidance or information may not be reflected. Please check

Former President Donald Trump in early August issued an executive memorandum to defer the withholding, deposit, and payment of certain payroll taxes because of the current health crisis.

The IRS recently released new guidance about how employers who deferred payroll for their employees can withhold and pay those taxes throughout 2021, instead of within the first four months of the year.

According to previous IRS guidance, employers could defer withholding of an employee’s portion of the 6.2% Social Security tax on wages paid from Sept. 1, 2020, through Dec. 31, 2020. The deferral applied to any employee who makes less than $4,000 biweekly on a pretax basis.

The IRS will still consider payments employers make by Jan. 3, 2022, as timely because Dec. 31, 2021, is a legal holiday. But penalties, interest, and additions to tax will start to apply on Jan. 1, 2022, for any unpaid balances.

The IRS did warn that employees could see their deferred taxes being collected immediately. The government agency recommends that employees check with their employer to find out what the collection schedule is.

If you have any questions about your business’s unique situation, please let us know so we can offer further guidance.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

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